Why having clear organisational values benefits a business

By Indeed Editorial Team

Published 8 July 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Almost every successful organisation has established core company values that it promotes to its management and employees. An organisation may state these values explicitly in an employee handbook, for example, or promote them implicitly and guide employee behaviour by reinforcing unwritten rules. Understanding and assisting to actively shape the values in an organisation can help improve its performance, productivity and success and contribute to enhancing the quality of life and job satisfaction of its employees. In this article, we examine the importance of establishing core values and examine how an organisation can effectively clarify and communicate them.

What are organisational values?

Organisational values are the core principles that guide valued-based business decisions. These decisions include operational concerns, such as setting hiring policies or pursuing flexible work hours. They can also be financial and investment decisions, like choosing to invest in green technologies or developing products that have a social impact. These core ethical principles, systems and behavioural expectations impact virtually every aspect of an organisation, including the way it operates and the job satisfaction of its employees.

Organisational values, whether explicit or implicit, often provide the foundation for the successful management of day-to-day operations. For example, if an organisation values and promotes transparency and accountability, it encourages employees to share their grievances and concerns without the fear of repercussions. Each cultural value an organisation introduces has advantages and potential drawbacks. An organisation's culture is the sum of its core values and visions and provides a complex set of conditions that can help or hinder the company's growth and expansion.

Why clarifying values is useful to an organisation

When organisational values are clearly defined and explicit, businesses can use them as a strong foundation for culture, behaviour and complex value-based business decisions. If an organisation values transparency, the leadership team may encourage actions like the publication of regular fiscal and work-related reports or open its regular meetings to comments from its employees and members of the public. As market forces and customer needs shift, a company may find it necessary to adjust its core values to remain competitive in the market.

Having clearly and explicitly stated values can help a company adjust to new market conditions quickly and align the decisions made by leadership, management and employees more efficiently. If the values and business goals do not align, adjusting one or both may be necessary to ensure a clearer direction for the employees and organisation. While this may be challenging, it's likely to result in long-lasting benefits, as adhering to clearly defined values may attract talented employees that share the same cultural and business goals. Here are some reasons why clarifying an organisation's values can help it thrive:

Help organisational decisions align with core values

When the leadership of a company makes a complex decision, clear values can help make sure it aligns with the organisation's mission and vision. As a company grows and develops, the choices it makes about what practices to adopt can have significant repercussions on the business model, revenue and ability to earn customer and public trust. An organisation guided by clear and explicit values can make value-based decisions with confidence. It can disregard expedient, cheap or easy decisions that contradict the core values of the company.

Organisations with clear values can make decisions confidently, realising that adhering to the mission and vision as a brand may be more sustainable than taking a shortcut and compromising ethical values. While this idea may seem counter-intuitive for a business trying to maximise utility, many buyers make decisions based on emotion rather than rationality. Providing the customer with the option to purchase from a company that actively supports and defends value-driven strategies can have disproportional advantages, especially in highly competitive markets.

Related: How to compile a company profile: a comprehensive guide

Improve internal communications at all levels of the company

Internal communication and alignment among employees within a business can be challenging. It's important that management implements the leadership's vision accurately to foster a sense of unity, security and direction among employees. Having clear and explicit core values can help settle disputes and differences of opinion. If there are multiple ideas about how to handle a particular situation, the core values can guide decision-making and help to ensure decisions reinforce the vision and mission of the company.

By clarifying and using the company values as the foundation for operational, financial and staffing decisions, the management of a company can promote a sense of confidence and stability. With clear and explicit values to serve as the foundation, management and individual employees can make decisions confidently without seeking justification from supervisors. This makes the decision process simpler and more predictable and helps to increase productivity and reduce time wasted.

Reinforce the brand

Internal attitudes, external messaging and customer experiences can all contribute to the broad perception of a brand's reputation, which is typically the sum of all experiences that the public, customers and employees have had with the business. By actively portraying what behaviours and priorities are most important and living up to the values of the brand, a company can experience the advantages that result from gaining a strong brand reputation. A favourable reputation may attract customers and the business's adherence to its core values may appeal to potential talented and skilled employees.

The advantages of having a strong brand reputation are a complex combination of perceptions that come from authentic sources and experiences. Building a brand's reputation takes time, is typically challenging and involves making many decisions in alignment with ethical values. Having a clear and explicit set of brand values may make it easier to gain brand equity and it avoids confusion among employees about which values matter to the company.

Improve motivation and engagement

Employee engagement and satisfaction often depends on how meaningful and rewarding they find their jobs. An employee performing a relatively menial task may be more engaged and motivated if they feel like they're making a meaningful contribution to an important project. Job satisfaction is important because an employee who considers that their work is appreciated or valued is more likely to feel engaged, regardless of the monetary remuneration they receive. By clearly and explicitly making the core values part of all work activities, a manager can bolster employee engagement and overall job satisfaction.

Making sure that employees are performing work that meaningfully contributes to a broader set of values and visions can help improve many business aspects, such as staff turnover rates and overall job satisfaction. By making the values clear and explicit, the quality of work may improve and you can retain employees with valued skills and knowledge. It can empower management to make value-based decisions and design policies that motivate employees and create the opportunity for meaningful engagement in alignment with the company's mission and vision.

Related: What are personal and professional values and why are they important?

Attract talented employees

Professionals who represent the top of their field routinely choose to work for organisations based on their principles and core values. Because these candidates often receive a wide range of job offers from employers, they can be selective in terms of where they decide to contribute their knowledge and expertise. Implementing clearly defined values may help an organisation attract highly skilled and talented employees.

Related: 10 types of core values (plus ways to identify your own)

How do organisations clarify their values?

Organisations that have a set of clear and explicit values may find it easier to codify their ideas and communicate them among employees. While every organisation has different values, the following process can help establish and define the values succinctly and ensure everyone within the organisation understands them:

  • assess the current culture

  • review the strategic business plan

  • determine the culture that may help the organisation achieve its goals

  • evaluate the need for a shift in culture

  • establish specific implementation ideas to promote a culture

  • implement changes through change management exercises

Evaluating the existing culture is typically the key starting point for any organisation. Even if a company hasn't formally defined and implemented its core values, there are usually certain values already in place. Understanding these and including them in any business analysis can help ease the transition when introducing formal values. The review of the business goals is also a key component when assessing if existing values align with the organisation's future goals.


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