Part 1: Principles Matter Series
Principles Matter. Always.
Principles have always mattered. They are the foundation of every business and every culture.
While many companies have taken a step in the right direction by documenting their guiding principles, they sadly do not put these principles into practice. The real principles of your organization are on display every day; it is not what you SAY, it is what you DO, that defines your principles.
The unclear or inconsistent practice of principles leads to a weakening of the culture and ultimately the company. There is nothing that creates cancer in a business faster than a leader that lets people know, “do as I say, not as I do”.
The Big Picture
I have written previously about core concepts that provide the structure around which a business operates. I called this structure the “Big Picture” for the business. The idea of the Big Picture is encapsulated in three key questions:
- Where are we headed? (Vision, Mission, Goals & Objectives)
- Why are we going there? (Purpose & Why?)
- What are the rules-of-engagement and boundaries? (Core Values & Guiding Principles)
While all of these concepts are important, none is more essential than the Guiding Principles. Principles are the base foundation of a business.
Culture is Where Principles Become Real
Guiding principles as they are written are abstract ideas; but these ideas, if practiced with commitment and discipline, can powerfully shape culture.
You may have made the step of defining guiding principles with culture building in mind. The ideas you developed may be perfectly clear to you and your leadership team, but assuming that the rest of the organization will automatically understand or interpret these ideas as you intended is a mistake. Principles only become real when they are routinely demonstrated as part of the organization’s culture. This discipline starts at the top; leaders of the company must routinely demonstrate and communicate their support and advocacy of the principles. There also must be visible accountability; when any group or individual (including the CEO) in the company violates a principle, there must be acknowledgment and consequences. Routinely asking questions such as, “Is this decision consistent with all of our guiding principles?” will go a long way to help build your cultural foundation.
Following Principles Can Hurt
Committing and living by principles in your company hurts at times. Sometimes, there is a negative near-term financial impact to sustain a principle. However, standing by your principles will always win out in the long term.
Consider the concept of Integrity; you will find that word appearing in many companies’ guiding principles list. Integrity is foundational to trust, and trust is required to sustain long-term relationships with customers. Trust can also drive higher margins, which drive increased profitability. Trust is directly connected to the performance of the team; team members that trust each other will always outperform those that don’t.
Business Case – What Choice Would You Make?
Integrity is easy to say, but harder to live by. Let’s explore a business case:
ABC Company has supplied parts to XYZ Company for several years and has a long-term contract with the company. ABC Company, in an effort to increase their profits, finds a new raw material supplier that is much cheaper. They begin using this new supplier, but after shipping parts for three months to XYZ company, an employee at ABC Company discovers that the new raw materials will cause the parts to fail prematurely. A team at ABC Company develops a plan to replace all the parts delivered to XYZ Company but determines that the cost will wipe out all of their profits for the year. They also determine that it would be difficult for XYZ to discover that the parts were defective. What should the CEO of ABC Company do?
If you believe in the principle of Integrity, the answer is easy. However, if you struggle with the answer, I suggest that you are looking at principles as opportunistic.
Shockingly, many companies operate without principles (other than maximizing profits), making up the rules as they go. Others have documented principles but abandon them at the first sign of inconvenience. Ignoring the importance of principles in shaping your culture and the long-term health of your business almost always leads to bad outcomes.
History is littered with examples, such as Boeing (737 Max), Enron, Lehman Brothers, etc. Most of these companies viewed from the outside were viewed as successful, but a subsequent investigation into their cultures showed evidence of rot that set the stage for their failures. The issue is so widespread that articles announcing a business “Trust Crisis” were published last year in Gallup and Forbes.
Principles Build Culture. Culture Drives Performance.
Strong principles are the cornerstone of every great company. It takes hard work and discipline to follow principles; you have to be intentional. You also need to hold yourself and your team accountable; this includes getting comfortable with ANY employee holding you and others accountable. The rewards are significant; employee commitment will increase, turnover will drop, and customer satisfaction will rise. The organizational trust rises, leading to the emergence of high-performance teams in your business.
Engaging your team in this discipline challenge is hard, just as any discipline in life. However, the hard work will have enormous returns over the long haul.
Do you think principles matter?
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