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Posted on Feb 9, 2018

When a Leader Falls Short – The Role of Values

When a Leader Falls Short – The Role of Values

The CEO of Lululemon Athletica, a Canadian-based athletic apparel retailer, recently resigned because of behavior that “fell short” of their standards of conduct. The company stated that Laurent Potdevin had failed to “exemplify the highest levels of integrity and respect for one another” but declined to give specific examples.

Is this a real case of a company’s values being applied to everyone, including the CEO? Or is this just another example of an executive abusing their leadership position, and the reference to company standards as a way to save face?

Background and Details

In 2014, Potdevin joined the company that became famous for its leggings and role in the creation of the “athleisure” trend. He was credited with improving the company’s supply chain, expanding its offering, making inroads with male buyers, and even dealing with a founder-shareholder shakeup. Prior to becoming CEO of Lululemon, Potdevin was president of Toms Shoes and chief executive of Burton Snowboards.

One publication claimed “there was a range of incidents that contravened the company’s conduct code – including a years-long relationship with a designer who left the company in 2014 but continued working as a contractor later on, though the company did not renew her contract this year.” Sadly, this type of behavior seems to be more common than we might expect (read my article here regarding what happened to Mark Hurd when he was CEO of HP).

If this is a case of a company upholding its values (and if so, I would truly applaud!), then why would the departing CEO be receiving a huge compensation? In Potdevin’s case, he is reportedly expected to receive $3.35 million in cash immediately, plus a further $1.65 million in monthly installments over 18 months.

This does not look like a case where values are the central focus.

  • Yes, the company may have outlined clear boundaries.
  • Yes, Potdevin knew he violated the values, and resigned.
  • But there should be no compensation for violating the values, especially for a resignation (vs. firing).

Something is not adding up.

Assessing The Company’s Values

Let’s take a look at what Lululemon posts on its website, where the company outlines it’s story:

A constant that has never wavered is our desire to empower people to reach their full potential through providing the right tools and resources, and encouraging a culture of leadership, goal setting and personal responsibility. Our core values of quality, product, integrity, balance, entrepreneurship, greatness and fun are lived by our people every day and are at the heart of our unique company culture.

There are two important parts to carefully consider here:

  1. Encouraging a culture of leadership… and personal responsibility.
    Without knowing the specifics of what Potdevin did to “fall short”, it appears he may have violated this part of company culture by NOT demonstrating good leadership and/or personal responsibility. But is this cause for the CEO to resign (or be dismissed)? Maybe. Maybe not.
  2. Core values of quality, product, integrity, balance, entrepreneurship, greatness, and fun.
    That’s 7 values! On the one hand, I applaud the fact Lululemon has stated values. But 7 values are too many. I recommend a company have no more than 3 values, because that’s all that most people can remember (per the work by researchers at Wharton, Oregon, and Penn State). If people can’t remember them, including the CEO, then these values will have NO impact on decisions and behavior. Why bother having any values at all?

This 2nd issue is likely a key culprit here.

Having too many values is a common and serious issue. It’s one of the reasons why I believe Pfizer Pharmaceutical had to pay a $2.3 billion fine for illegally marketing a drug beyond its FDA approved mandate – where leaders throughout the company did so knowingly! Why? Because Pfizer has 9 values (including Integrity) and having that many values is like handcuffing a company’s leaders. As Patrick Lencioni highlights in his book The Advantage it’s nearly impossible for leaders to make all decisions satisfy so many values, all of the time. The end result is that leaders choose to ignore the stated values in order to move the business forward.

That may be what happened to Potdevin at Lululemon.

Diving Deeper

I believe the solution is simple: have fewer stated values – ideally no more than three!

In the case of Lululemon, 7 values are too many. Until there are fewer values to make decision-making easier – and a reason to use them – it’s highly likely that any leader at this company will continue to violate these values.

The other question to consider is:

Do the stated values support the desire to encourage “a culture of leadership, goal setting and personal responsibility”?

Again, I would argue that too many values cause leaders to abandon and ignore them. This in turn means there is no benchmark for keeping leaders accountable. Any type of desirable statement is simply wishful thinking.

In other words, it should be anticipated that leaders at Lululemon will continue to “fall short” of the 7 stated values (and the associated code of conduct). In addition, investors, customers, and employees will likely continue seeing large payouts being made to leaders who violate the values. This in turn only further feeds the belief that values don’t matter and simply remain a useless plaque on the wall.

A call to leaders: if you really believe in and care about the power of values, then reduce their number (to 3), use them for all decisions, and be accountable to them. A few values CAN make a big difference.