Most executives are nervous about discussing organizational values. Many are downright cynical, and believe that shared values are something that managers talk about to make their staff feel good but that have no bearing on performance.

Recent research indicates that shared values do in fact provide a framework within which people make decisions and take actions that ultimately affect the performance of their organizations. Values evolve as an organization tackles and solves the problems it faces. They are not always articulated. Some are so fundamental to human nature, to a company, or to an industry that people are not even conscious of them.

Shared values affect performance in three key ways. They provide a stable base for guiding employee decisions and actions in an otherwise rapidly changing workplace; they form an integral part of an organization’s value proposition to customers and staff; and they energize people to go the extra mile for their company, thereby creating a source of competitive advantage that is hard to replicate.

Different places, different values

An organization’s shared values usually concern why it exists, how it succeeds, and how its people should be managed (Exhibit 1). Values in the last category have a marked impact on productivity. Many executives search for a universal set of people values that they believe all successful organizations share. In fact, successful companies in different industries, and even some companies in the same industry, have formulated quite distinct sets of people values that work for them. These companies actively manage shared values to drive performance. They use carefully designed processes to recruit people who "fit" their values profile and to develop and reinforce those values.

People values tend to fall into two main categories. The first comprises an organization’s shared values about how people should work together—for instance, whether it encourages people to work alone or values joint effort in teams. The second category consists of values concerning the primary motivation for effort: does the organization believe people are motivated mainly by competition and reward, or by some noble purpose? Combining these two dimensions, in a matrix, reveals that different organizations have developed very different approaches to managing people (Exhibit 2).

Money and teams

At Nucor, for instance, an important shared value is that people should work together in teams. The company also believes that money drives individual performance with competition between teams a secondary motivator. The front line is structured around operating teams of 25 to 40 people, all of whom are treated equally. Ken Iverson, Nucor’s Chairman and former CEO, describes management as a necessary overhead that he keeps to a minimum.

While competition between teams is actively encouraged, cooperation within teams is valued highly. The pay system is tightly linked to team—rather than individual—performance, with a monthly report ranking all divisions on a series of agreed criteria. This report is available to all managers and details from it are prominently displayed in the cafeteria. There are no limits to bonus payments, which encourages a continual escalation in performance levels. Bonuses are paid on a weekly basis to provide instant feedback on performance. Teams are highly effective at weeding out poor performers.

Money and individual performance

In contrast to Nucor, SunTrust has developed a shared value of accountability for individual performance. This is linked to a related value: that meeting financial goals is the primary motivation for performance. At SunTrust, there is a belief that you get the best performance from your people by getting them to agree to goals against which they are rigorously measured. SunTrust has introduced processes to help people set their goals as well as systems for monitoring their performance.

SunTrust’s goal-setting and incentive programs are negotiated by its top management, local banks, divisions, and frontline officers. Most people are involved in setting their own tough goals. A key to success has been SunTrust’s ability to recruit goal-oriented people who pride themselves in meeting their targets. They have also found it important that the individuals agree up front about the reasonableness of their targets. There is monthly feedback on their performance against target and many incentives are paid on an all-or-nothing basis depending on performance.

At SunTrust, there are no excuses and no extenuating circumstances. As at Nucor, there is a strong performance ethic, with great pride in doing what you say you will do and tremendous enthusiasm and energy to get things done.

Individuals with noble purpose

Merck, like SunTrust, believes individual endeavor is the key to performance. It hires the best students and nurtures them in an environment that promotes both commercial viability and scientific recognition: within commercial constraints, Merck researchers are allowed to publish their findings. Dual career ladders are maintained, to reward researchers and managers equally. Researchers who make substantial contributions to bringing new products to market receive generous bonuses and prestigious awards, such as the chance to donate a professorial chair at the university of their choice.

However, whereas SunTrust’s primary motivation is to deliver profits, people at Merck are also motivated by a noble purpose—to preserve and improve life. For example the company gave away its drug Mectizan, which cures river blindness—a disease that affects over a million people in developing countries—because the people who needed it could not afford to pay for it. It also helped distribute the drug at its own expense. Similarly, it took streptomycin to Japan after the World War II to eliminate tuberculosis, and didn’t make any money from it.

Teams with noble purpose

The Body Shop has shared values that encourage people to work together and that view noble purpose as the primary motivator of individual effort. CEO Anita Roddick has carefully shaped a team ethic by using the metaphor of the community; staff describe themselves as part of The Body Shop community. Tight management is described as "good housekeeping," staff training as "learning and development."

Roddick has drawn on her activist experience in the 1960s to create noble goals that include ecological sustainability, an opportunity to give back to the community, no animal testing, and fair trading with communities in need. Her staff are proud to be fellow activists working on her campaigns. But the company also recognizes the importance of managing the housekeeping. As Roddick says, "We can only keep on doing good if The Body Shop keeps on being profitable."

These four companies are very different. Each has its own distinctive shared values about managing people, all of which seem to work well. As these examples demonstrate, there are no universal values about how best to manage people, and it is possible to actively shape shared values within a business.