^{Written by Geoff Marlow}

 

The plausible believability of a tenacious falsehood...

“These are my values. And if you don’t like them, I have others.” – Groucho Marx

 

A recent Google search for ‘culture as shared values’ returned these top hits:

• “High Performing Teams Start with a Culture of Shared Values”

• “Why Employees Need Shared Values to Be Fully Engaged”

• “All workplace cultures should have a deeply held set of values that are shared by those working and living in it.”

• “Shared values are developed by the organization's leadership and then adopted by the other members of the organization”.

• “Positive Shared Values Equals Positive Culture”

   

 

Given the above, you’d think that amongst the dozens of organisations I've had the privilege to poke about in throughout Europe, Asia and the US over the past 35 years, the best performers would be living proof of the power of shared values.

Quite the contrary.

In fact, the organisations that trumpeted their shared values most loudly were the ones whose cultures were most toxic to innovation, agility, and adaptiveness.

This ought to be no surprise, given how many high profile organisations singularly fail to live up to their supposed values.

But the myth of culture as shared values persists.

 

Enron’s shared values

Enron won Fortune’s ‘America’s most innovative company’ award for an unprecedented six years (1996–2001) and the 2000 Financial Times ‘energy company of the year’ gong.

London Business School Professor Gary Hamel was fulsome in his praise for them in his book ‘Leading the Revolution’ (Harvard Business School Press, 2000).

“Enron hired contract originators who were bold, hungry, and creative. They were assigned a territory and/or a specialty, but their real assignment was simply to find ways to make money”. 

Unfortunately, they found ways to make money that were illegal, then tried to cover their tracks, despite ‘shared values’ of Integrity, Respect, Communication and Excellence.

When this finally came out in 2001, Enron collapsed in a $65Bn wipeout - up to then the biggest corporate value destruction in history - due to persistent fraudulent behaviour at the highest management levels. ¹

 

McKinsey’s shared values

Top management consulting firm McKinsey, who invented the notion of ‘culture as shared values’, were themselves fined an eye-watering $573,000,000 for helping "turbocharge" (their word) opioid sales in the US amid a crisis that's contributed to more than 450,000 deaths. ²

This grossly unethical conduct occurred despite McKinsey’s ‘shared value’ of “high ethical standards”. ³

Note that McKinsey were retained advisers to Enron CEO Jeffrey Skilling at an annual fee of $10,000,000. Skilling, himself a former McKinsey consultant, was sentenced to 24 years in prison for conspiracy, insider trading, false statements, and securities fraud. ⁴

If McKinsey, the people who cooked up the ‘culture as shared values’ approach in the first place, can’t make it work - neither for their clients nor themselves - then why does anyone believe it?

But ‘culture as shared values’ isn’t just believed, it’s widely accepted as self-evident truth.

 

Plausible believability

What is it that keeps this almost religious belief in ‘culture as shared values’ so vibrantly alive and accepted as axiomatic in the ongoing organisational discourse?

The problem is that ‘culture as shared values’ has such highly tenacious plausible believability - due to two mutually reinforcing psychological dynamics.

The first dynamic operates inside-out, based on projection. We project our experience of the power of our own personal values into the organisational realm in a leap of logic that’s deceptively easy to do, and devilishly difficult to avoid.

The second dynamic operates outside-in, based on introjection. We introject the mental model of culture that captured the organisational consciousness 40 years ago when it was first introduced. ⁵

 

 

The inside-out dynamic

The value of shared values just seems so self-evidently true - doesn’t it?

The leap from “my personal values are what drive me” to “therefore shared values must be what drives an organisation” is so effortless it’s hardly ever questioned.

This projection of the personal onto the organisational is particularly plausible if you’ve done the inner work to clarify your own personal values and try to apply them conscientiously in your day-to-day actions and interactions. ⁶

The profound impact of living one’s own personal values provides a powerful incentive to leap to the conclusion that the same must apply to organisational values.

And having made this leap, the believability of ‘culture as shared values’ seems sufficiently self-evident to warrant no further scrutiny.

But here’s the problem.

 

 

Personal values are exactly that – personal to you as a unique individual. They’re not the same as someone else’s values.

And the statistical probability of everyone in the same organisation sharing the same values turns out to be vanishingly small…

 

 

In 2012 the University of Zurich (UZH) published research identifying nineteen core human values they found consistently represented across cultures. ⁷

Given that most organisations list around five core values, the probability of two individuals sharing the same five out of nineteen is 1 in 11,628. ⁸

That’s a lot of interviews to find someone with the same shared values…

 

 

My colleague Dr Richard Claydon came across a company that offers clients a list of 500 core values to choose from. 

As Richard points out: “If it’s true that there are 500 core values, you’d have to interview more people than have ever been born in the history of humanity to find somebody who randomly picked the same five shared values…”

I did the maths.

It works out at 1 in 255 billion people. ⁹

 

 

As the above numbers demonstrate, the idea that an organisation could ever be populated by people who all share the same values is patently ridiculous.

Not only that, but an organisation populated by people who shared the same values would be disastrous, as these examples (using the UZH definitions) demonstrate :

• For creative work you need people high in ‘Self-Direction Thought/Action’ - which UZH define as: “Freedom to cultivate one’s own ideas and abilities / determine one’s own actions”. But in the same organisation you also need people high in ‘Conformity–Rules’ - which UZH define as: “Compliance with rules, laws, and formal obligations”. Based on Professor Hamel’s analysis above, Enron clearly had too much of the former and not enough of the latter.

• Ambitious, growth-focused organisations tend to be driven by people high in what UZH call ‘Power-Dominance/Resources’ - defined as “Power through exercising control over people / control of material and social resources”. But to stay ethical, the organisation also needs people high in ‘Universalism-Concern’ - defined as “Commitment to equality, justice and protection for all people”. Their $573M fine for boosting sales of opioids suggest McKinsey possessed precious little of the latter to offset their renowned abundance of the former.

• In a future-fit culture where sense making, decision making & action taking must become ever more tightly coupled, rapidly and repeatedly iterated, deeply embedded and widely distributed throughout the organisation, there’s a need for less ‘Power-Dominance’ - “Power through exercising control over people’ and more ‘Universalism-Tolerance’: - defined as “Acceptance and understanding of those who are different from oneself”. If everyone had the same values there’d be none of the diversity essential for innovation, agility, and adaptiveness. ¹⁰

 

But even with all that, the belief that an organisation’s culture ought to be its shared values is so psychologically sticky it’s still tempting to ignore the facts.

 

The outside-in dynamic

To understand how McKinsey came up with the ‘culture as shared values’ myth, we need to go back to how organisational culture became a thing in the first place.

Interest in organisational culture began around 40 years ago in the wake of Japan's resurgence from defeat in WWII to become the world's second largest economy - aka The Japanese Miracle. ¹¹

Corporate America was reeling from this onslaught and had no answers.

Nor did the mainstream consulting firms they’d always relied on.

McKinsey were already on the back foot, having lost their historical dominance of the strategy consulting market to Boston Consulting Group (BCG), to whom clients were defecting because they saw BCG as smarter than McKinsey. ¹²

McKinsey couldn’t let this insult go unchallenged and launched two research projects aimed at recapturing the ‘intellectual high ground’. ¹³

One project sought to challenge BCG’s growth-share matrix whose notions of cash cows, stars, dogs, and problem children had done so much to change thinking about strategy and earn BCG their ‘smarter than McKinsey’ reputation.

 

 

The second project, prompted by the recognition of differences between American and Japanese culture, was to see if they could dig up some new ideas from the different cultures of other countries.

So, McKinsey packed off a then unknown Tom Peters on a five-year global study tour.

Peters says McKinsey did this because they were "bedevilled by the frequency with which clever strategies failed to be implemented effectively".

He points out that “McKinsey's arsenal mostly consisted of “strategy” and, secondarily, “structure”. All that was not to be cured with a scintillating strategic plan was to be dealt with by re-arranging the boxes on the formal organization chart.” ¹⁴

He says his boss, Bob Waterman, “wanted our work to be constructed in a way that would help the average McKinsey-ite take a shine to issues of organization effectiveness. (Which was, after all, the point of the exercise.)” ¹⁵

 

 

McKinsey’s ‘7S’ model

Waterman invited Tony Athos, a Harvard Business School professor and Richard Pascale to spend two days with him and Peters in San Fransisco where they cooked up McKinsey’s infamous ‘7S’ model.

The ‘7Ss’ included the three ‘Hard Ss’ of Strategy, Structure, and Systems - McKinsey’s traditional bread & butter.

To include something more humanising they added the ‘Soft Ss’ of Staff, Skills & Style – all supposedly glued together by the seventh ‘S’ – shared values (“organizational culture” according to Peters). ¹⁶

The seventh S was originally Superordinate Goals, an idea Athos introduced from social psychology - meaning ‘worthwhile goals that require two or more social groups to cooperatively achieve’. ¹⁷

But Superordinate Goals wasn’t catchy enough for “the average McKinsey-ite”, so it was changed to shared values – a term plucked out of thin air…

 

 

The main problem with this was that whereas superordinate goals requires cooperation across external boundaries, shared values instead focuses within internal boundaries.

As a result, instead of encouraging cooperation and collaboration for co-creating new value across boundaries, this focus on shared values turned ‘culture’ into a normative behaviour control methodology. ¹⁸

Senior executives, aided by McKinsey consultants, could now define a set of shared values to make people in their organisation into compliant drones, in whom specific desired behaviours could be reinforced via extrinsic carrots and sticks.

The Borg had arrived.

They would assimilate everyone’s uniqueness.

Resistance was futile. ¹⁹

For US business executives fearing the loss of their command & control ‘decision rights’ to more collectivist ‘Japanese style’ sense making, decision making & action taking, the normative behaviour control methodology of shared values was a godsend they welcomed with open arms.

McKinsey’s ‘culture as shared values’ approach was kicking a ball into an open goal.

Peters et al published the ‘7S’ model in the June 1980 issue of Business Horizons, the legendary McKinsey marketing machine kicked in, and the myth of 'culture as shared values' was virally infecting organisations everywhere…

 

Big problems

There were several major problems with this that remain largely ignored.

The first, highlighted by McKinsey’s own spectacular $573 million failure to live its “shared values”, is that culture - even a culture of compliant drones - isn’t actually created in real world organisations by coming up with a list of shared values. ²⁰

The second big problem is that the future-fit cultures of innovation, agility, and adaptiveness needed in our increasingly uncertain and unpredictable world don’t need compliant drones but intrinsically motivated individuals living their personal values.

Unfortunately, by the time organisations realised this they’d been drinking the ‘culture as shared values’ Kool-Aid for almost 30 years and couldn’t conceive of an approach to culture change not based on coming up with a (new) set of shared values…

 

 

But there’s a much more serious systemic problem.

Not only organisations, but the whole mainstream organisational discourse, is so deeply in thrall to the myth of culture as shared values, senior executives believe that if they define and roll out the right set of shared values, they’ve magically ‘fixed the culture’.

So, once the posters with the list of shared values go up on the walls, the illusion that the culture is now on track means there’s zero incentive to attend to what’s actually required to create a future-fit culture.

 

Having a list of shared values to point at and say “that’s our culture” absolves senior executives from responsibility for changing the mindsets, attitudes and behaviours of the actual key influencers of the culture - some of whom are often, of course, themselves…

 

 

When senior executives point at the shared values list and say “that’s our culture” it allows key influencers to get away with murder - or, more commonly, accounting fraud, self-enrichment, environmental pollution, societal damage, lying, cheating, bullying, harassment, and the general mistreatment of others. ²¹

It’s therefore hardly surprising that the organisations that trumpet their shared values most loudly tend to be those whose cultures are the most poisonous.

That’s why the myth of culture as shared values is so toxic to creating a future-fit culture of innovation, agility, and adaptiveness.

 

 

Tom Peters reveals the reality…

There’s a final compelling twist to the story.

In his 'Brief History of the 7S Model', Tom Peters says: “My favorite certification of our approach came almost 20 years later from the ultimate "Hard S guy," McKinsey alum Lou Gerstner, in ‘Who Says Elephants Can't Dance’, summarizing his IBM turnaround effort: "If I could have chosen not to tackle the IBM culture head-on, I probably wouldn't have. My bias coming in was toward strategy, analysis and measurement. In comparison, changing the attitude and behaviors of hundreds of thousands of people is very, very hard. [Yet] I came to see in my time at IBM that culture isn't just one aspect of the game—it is the game."

 

 

Peters’ comments prompted me to read ‘Who Says Elephants Can't Dance’, and here’s what Gerstner actually wrote that Peters carefully cherry picked above (my emphasis in bold):

“In comparison, changing the attitude and behavior of hundreds of thousands of people is very, very hard to accomplish. Business schools don’t teach you how to do it. You can’t lead the revolution from the splendid isolation of corporate headquarters. You can’t simply give a couple of speeches or write a new credo for the company and declare that the new culture has taken hold. You can’t mandate it, can’t engineer it.”

 

 

Peters says this is his “favorite certification of our approach”.

But Gerstner didn’t use McKinsey’s ‘culture as shared values’ approach.

In fact he explicitly disavows the use of a list of beliefs, values, or principles (a credo).

So, in reality, far from being a certification, Gerstner’s successful transformation of IBM is a clear repudiation of McKinsey’s ‘culture as shared values’ approach.

The fact that Gerstner, as a former McKinsey partner, used neither McKinsey’s approach nor McKinsey consultants to transform IBM speaks volumes.

Here’s what Gerstner says about culture in full - as opposed to Peters’ cherry picked edit above:

“I came to see, in my time at IBM, that culture isn’t just one aspect of the game—it is the game. In the end, an organization is nothing more than the collective capacity of its people to create value.”

 

 

In an increasingly uncertain and unpredictable world, the collective capacity of people to create value depends on sense making, decision making & action taking being ever more tightly coupled, rapidly and repeatedly iterated, deeply embedded and widely distributed throughout the organisation.

That requires organisations to create a future-fit culture of innovation, agility, and adaptiveness in which individuals are fully appreciative of the different strengths, perspectives and values each of them can contribute.

You won’t create such a culture until you encourage, enable, and empower people to operate from their own innate, intrinsically motivating personal values. ²²

So, if you’re determined to escape the toxic myth of culture as shared values, what can you do to create a future-fit culture instead?

How does culture work..?

Fortunately, that’s the secret everyone already knows…

 

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