Values and principles set the boundaries for how an organizations operates and deals with its various stakeholders. In a previous article, we used the analogy of a funnel to describe the management system of an organization as it moved from broad concepts of operation to the definition of discrete actions. The foundation of such a management system are the values and principles held by the organization and its leaders.

All organizations have values and principles. Sometimes referred to as core values or company ethics, these values and principles guide the way that the organization operates and interacts with its various constituencies. Values and principles might be explicitly stated, such as a statement in a policy manual, annual report, or signage within the building. These explicit statements are an expression of the character traits that are expected in the business and its dealings with people.

For some organizations these values and principles are implicit, and employees and others are left to infer them from the actions and attitudes of the organization’s leadership. For some organizations, the core values are carved in stone while for other organizations they might seem like shifting sands. If we expect employees to behave in certain ways, of course, it is best to clearly communicate what the organization’s values and principles are and stand by them.

Values and principles are foundational for two different descriptive systems for an organization – the management system and the culture. The values and principles set the boundaries for the organization’s mission and vision and for the business strategy and specific actions. In terms of culture, the values and principles set the tone for the behaviors, attitudes, and relationships that the organization hopes to see within the organization and then reflected to customers.

Since values and principles are for an organization very much like character is for an individual, authenticity is important. The behavior of the organization (or of the people that make up the organization) must be congruent with the statement of core values. Otherwise, the constituents will see the statement of values and principles as a farce and have even less respect for and trust in the organization. The walk and talk of leadership must be meticulously consistent with the proclaimed values and principles and part of leadership’s role must be to reward behavior demonstrating values and correcting behavior that violates the organization’s values and principles.

As mentioned, values and principles set the foundation for an organization’s management system. The next article in this series will discuss mission and vision, where we begin to describe the specifics of what the organization is and aspires to be.