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Posted on Jul 6, 2018

3 Reasons Companies Change Their Values

3 Reasons Companies Change Their Values

When discovering Differentiating Values, the first two parts of my Values Test is determining if a value is Unique to an organization and Relevant to its key customers. The third part is assessing if a value is Sustainable over time by the organization, where it can easily deliver in a consistent manner for at least 3 to 5 years, and ideally longer.

Since I completed my values research of the Fortune 500 companies in 2014, I have revisited a number of these companies and been surprised at how many have revised or totally overhauled their values. Only recently this issue became quite evident to me.

If you read two of my recent posts – 7 best definitions of Respect and 10 best definitions of Excellence – you’ll see a number of companies (9 of 17) that have made changes to their values. These include:

  • AES has simplified the labels of their values and expanded the definitions.
  • Air Products has replaced previous list of six values with four different terms as outlined in their ‘Roadmap’.
  • CarMax has removed the definitions of all ten values from its website.
  • CF Industries has changed their previous seven values to four different values
  • Gilead Sciences has expanded the number of values from four to five.
  • Nationwide has removed the definitions of its four core values.
  • TIAA has replaced previous four values with six new values.
  • Universal Health Services has replaced their previous seven principles with three different values.
  • Walgreens’ values can now only be found in their 2017 Corporate Social Responsibility Report. It appears their original four values have been removed from their website.

This begs the question:

Why would a successful company make changes to its values?

I see three possible reasons.

3 Reasons Companies Change Their Values

Sometimes a company might tweak or adjust its values (or only one or two of them). Other times, just the definition of values might be altered or updated. And sometimes a company might choose to replace its values with a whole new set.

So, what’s driving these changes?

There are three reasons leaders of an organization might change its values.

  1. Wrong values. The leaders suddenly feel (or discover) the existing values are not the right ones. The values don’t align with the reality of the existing culture, don’t support the direction the organization is headed, and/or are not relevant to key customers.
  2. Values not sustainable. While the values might have been good when first selected, the leaders determine one or more of the existing values (as currently defined) no longer support the strategic direction of the organization.
  3. Change in leadership. It’s common for new leaders to want to implement “their” vision for the organization. This may include attempting to shift internal culture, changing the external brand, and/or repositioning the organization in the marketplace. Such a change occurs when the top leader fails to deliver on key metrics and is replaced with a new face, or a merger / acquisition takes place, or both.

In my experience, the first two reasons are legitimate. But the third one is rarely a good reason.

It’s one thing for leaders of an organization to recognize that the current values are not making an impact, because of either poor initial selection or no longer supporting the strategic direction. But changing values to meet the needs of a new leader is like putting on a hat while running in the hot sun expecting to suddenly feel cool.

Leadership Changes

Through my ongoing assessment of Fortune 500 companies, it appears a change in values can be most often linked to a change in leadership.

For example, looking at the list of nine companies above: five experienced a change in leadership, one a reorganization, and at least two witnessed acquisitions. Here is a list of specific details:

  • AES: has had the same leadership since 2011, but the company announced a reorganization in February’2018.
  • Air Products: changed leadership July 2014.
  • CarMax: is in the middle of a leadership transition.
  • CF Industries: changed leadership January 2014.
  • Gilead Sciences: changed leadership March 2016.
  • Nationwide: has had the same CEO since 2009.
  • TIAA: acquired EverBank in August 2016 and changed its name (dropping CREF).
  • Universal Health Services: has had the same CEO since he founded the company in 1979.
  • Walgreens: acquired Alliance Boots in January 2015, taking on a new CEO from the acquired company (who then acquired half of Rite Aid).

Of course, over the past few years all nine of these companies have experienced competitive pressures in the marketplace and various threats to each of their unique cultures. But the question above remains:

Why would a successful company make changes to its values?

Maybe it’s time for the board of directors, investors, employees, and even customers to ask this question of a company’s leaders.