The Unseen Compass: How an Organisation’s Core Values Influence Strategy

Crafting a brilliant strategy is a significant undertaking, but ensuring it is effectively implemented can be even more challenging. While many factors contribute to strategy failure, including poor execution or flawed design, research identified a crucial foundational element: an organisation's core values. These deeply held beliefs act as an unseen compass, profoundly influencing both the formulation and the success of strategy.

Core values can be defined as a handful of guiding principles, nurtured for their own sake, that stand the test of time. They are things that define what an organisation stands for, even if adhering to them becomes a competitive disadvantage. Along with core purpose, they form the core ideology of a company.

Knowing "why we do what we do" is a commonality among most successful organisations, and core values are central to this understanding. Conversely, it is considered a strategic failure for an organisation not to know "who you are". This fundamental self-awareness, rooted in clear and understood core values, is not just an abstract concept; it directly impacts the strategic journey.

Here's how core values influence an organisation's strategy:

1. Shaping Strategy Formulation: Core values are not merely add-ons; they are foundational to the strategy development process. When formulating strategy, managers need to agree on their purpose (mission), aspiration (vision), and internal compass (values) before deciding on the strategy itself. Reaffirming these elements puts executives in the right mindset for considering strategic options and setting fundamental guidelines. Strategic questions asked at the outset of the planning process explicitly include whether there are any core values that should shape the strategy. The enduring success of visionary companies is attributed, in part, to having core values and a core purpose that remain fixed while their business strategies endlessly adapt to a changing world. This implies that strategy is designed within the boundaries and guidance provided by the core values. Furthermore, fundamental beliefs, including cultural bias (which is closely linked to values), inform, influence, and shape strategic choices.

   
   

2. Driving Alignment and Preventing Conflict: Strategy implementation is significantly hindered if strategies are not aligned with the organisation's mission, values, and culture. When there is a misalignment between the desired strategic direction and the day-to-day values and practices within the organisation, employees may exhibit resistance and scepticism. A lack of alignment can lead to clarity, conflict, and ultimately, strategy failure. Ensuring strategy is deeply aligned with core values is crucial for effective implementation. Managerial practices that incorporate employee input and encourage shared values also heighten a sense of ownership, promoting adherence to strategy implementation.

   
   

3. Providing Direction and Motivation: Just as a good vision provides direction and motivates action, core values contribute to this by defining the organisation's identity and guiding principles. They help clarify "what we stand for". Strategic goals themselves should be purpose-driven, and putting purpose at the core of strategy has been shown to lead to outperformance. Leading with purpose can drive business performance, and linking purpose to the strategic vision in a way that aligns people can enable companies to potentially outperform competitors. Starting strategy creation with the question "What's my organisation's purpose?" is recommended, as leaders driving real change are often motivated by a desire to make a difference as much as to make money. This inherent motivation is tied directly to the core values and purpose.
   

Tip: Do you know what your organisation's core values are? If you don't or aren't sure, think about doing this. Get a group of 8 - 10 employees together. Employees from any level and from a mix of functions - their only qualification being that they have been with the organisation for a few years. 2 hours in a room together and they will come back and tell you what they are! In essence, core values are not just abstract statements but are intrinsically linked to the strategic health and effectiveness of an organisation. They provide the essential 'why' and 'who we are' that must underpin any successful strategy. Failing to understand or align with these core values during strategy formulation can sow the seeds of failure, leading to confusion, conflict, and lack of buy-in during implementation. When strategy is authentically rooted in and guided by clearly defined and actively nurtured core values, it gains clarity, coherence, and the vital organisational alignment needed to translate plans into purposeful action.