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...