The what, why and how of organizational values: a study of the interpretation and implementation of organizational values within fast-growing Australian companies

Abstract

This thesis reports an exploratory study of the formation of organizational values within earlystage, fast-growing Australian companies, based on exploration of the approach to and interpretation of organizational values adopted by the founders. Much of the literature on organizational values relates to established companies where founders or their descendents are no longer involved. However, the influence of founders in creating organizational culture, and in defining the values that underlie that culture has been widely acknowledged (Schein, 1983; Collins & Porras, 1994). Many companies do not identify organizational values, and many of those who do so fail to embed them convincingly (Lencioni, 2002), so it is pertinent to ask what motivates those who choose to adopt values-based leadership. So far as I am aware, no other study has been made of why founders or owners of companies might choose to develop organizational values, how they interpret what is meant by the term ‘values’ and how they choose to apply them within their companies. Review of the stages of growth literature (e.g. Churchill & Lewis, 1983; Quinn & Cameron, 1983) suggested that it was at the point where a company reached the size or structure where direct supervision was no longer practical that the benefits of defining ‘soft’ control systems such as organizational values might become apparent. Growing companies were therefore selected as the sample frame for the study. The research approach involved in-depth interviews with founders (in one case non-founder CEO) of 15 early-stage, fast-growing or growth-oriented Australian companies. Company documents reflecting values were collected where available (including web site material). A survey collected descriptive information relating to growth dimensions (turnover, employee numbers, geographic locations), and a measure of business maturity developed by Davidsson and Klofsten (2003). Finally, an employee satisfaction survey assessing the gap between the company and a perceived ‘ideal’ company was offered (and accepted by eight of the companies). The main unit of analysis was the founder, with the actual values identified for each company as embedded sub-units (Yin, 1989). Analysis of interview transcripts and company documents identified both espoused and implicit values within companies. Thematic coding (Strauss & Corbin, 1990; Miles & Huberman, 1994) revealed two distinct triggers for defining organizational values: intrinsic awareness and external prompting. Expectations of benefits from adopting values fell broadly into three non-exclusive categories: strategic (guiding strategy and decision-making); enabling (aligning the workforce); and tactical (guiding day-to-day activities). There was no apparent relationship between the trigger for defining values and the expectation of benefits. The process for selecting organizational values was ad hoc and the individual values selected for the companies studied varied in nature both within and between companies. Different values placed different obligations on members of the organization, but these differences did not appear to be recognised by the founders, or within the literature on organizational values, thus leaving a gap that limited both practitioners and researchers. A descriptive framework was developed to captures these qualitative differences in a systematic fashion: ethical (what is desirable); psychological (what provides personal fulfilment); and pragmatic (what makes the company successful). It was found that the same value in the same company could be expressed in all three ways, thus a scale was developed to represent the degree to which each value was ethically, psychologically or pragmatically oriented. Basic statistical analysis of the results derived suggested that there may be relationships between the orientation of values and the degree to which they represent shared organizational values or just the founder’s personal value system, and also the degree to which they influence ethical reasoning anddecision-making. The development of this classification system (subject to successful replication), allows for a more systematic investigation of organizational values, in both emerging and established organizations. Finally, interviews with founders suggested a relationship between their personal value systems, the degree to which they viewed the company as an extension of their own identity and their business growth aspirations. A tentative model of relationships was developed, drawing on the literatures of entrepreneurial intentions and entrepreneurial cognition