‘If vision is where you are going, it is culture that gets you there’. This message is at the heart of Spotify’s value system and if becoming one of the world’s largest companies was the vision, then the culture has certainly helped get it there.
Daniel Ek, founder and CEO of Spotify, understands the importance of creating a meaningful value system that reflects his own personal principles.
In a letter to investors last year, Ek recounted his love of music and his desperation to protect creative artists from the corrosive forces of piracy. Spotify was born out of a need to pay musicians for their work while giving listeners affordable access to the work they love.
Ek wrote: “I built a company based on a core set of values: innovation, passion, collaboration, transparency, and fairness. These values drive how we work with the creative community and how we treat our users. They’re why we’re committed to a diverse workforce in an open, trusting company culture.”
Today those five values remain, and every employee understands the roots of Ek’s value systems and is expected to reflect these in their own work.
Unfortunately, the Spotify experience is not easily replicated.
Even the most cursory glance at a company website will uncover the business’ core values, yet it might take a more forensic search to find a set of principles that offer any real depth of meaning.
Invariably the words ‘trust’, ‘integrity’ and ‘diversity’ will appear since it is hard to disagree with the importance of these characteristics in laying the foundations for any business, but without relating these to how the firm operates these easily become hollow platitudes.
It is critical that a business formulates a set of values that come intrinsically from the founders themselves. It must resonate from management down to the most junior employee.
A value system that is relevant and relatable to the entire workforce can then translate to customers, which is of course good for business.
Netflix, another global media behemoth, also has core values that originated from the founder. Reed Hastings coined the term ‘freedom and responsibility’ which quickly spread through Silicon Valley as a mantra by which today’s tech firms live.
Netflix expanded these two founding principles into a wider philosophy comprising four key values: judgement, courage, selflessness and inclusion.
Critically, the firm insists that everyone who joins the business understands the principles, is willing to adhere to them and see them through in their day to day work.
The firm’s core philosophy is ‘people over process’. It states: “We have great people working together as a dream team. With this approach, we are a more flexible, fun, stimulating, creative, collaborative and successful organisation.”
Patty McCord, chief talent officer for Netflix for 14 years until 2012, told the Harvard Business Review that ‘making great hires is about recognising great matches’ and that means individuals who reflect the company culture [https://hbr.org/2018/01/how-to-hire].
She added that people who were let go from Netflix often went on to be huge successes elsewhere because they were a far better match for another organisation’s value system.
To make sure that individuals meet the company’s core values both at the point of hire and throughout their tenure, CEO’s need to ensure they have a process for monitoring fit.
During the interview process, it is important to ask candidates to demonstrate where they have proven track record in acting in line with core values.
Once they are hired, appraisals and reviews need to reiterate the core values and have performance targets that link to them.
Aside from populating the business with individuals who believe in the core values, the business itself must reflect the founding principles.
This is imperative to ensure relationships with customers and suppliers remain healthy and sustainable.
For example, if a company’s core value is to deliver on time, yet a customer has unrealistic deadline expectations, it is important that the business is not compromised, and the client is made aware of what to expect. For example, renegotiating an achievable delivery time that ensures the company does not let the customer down, or be willing to decline the work because it might undermine the business.
Ultimately the focus needs to be on long-term sustainability rather than short term gain.
If a business is dedicated to always delivering value, it is critical that customer relationships are reviewed regularly to ensure that the company is living up to expectations rather than allowing relationships to carry on simply for revenue.
It may seem counterintuitive to end profitable contracts, but if these eventually fail because the company cannot meet its ‘value’ target, not only has that revenue stream ended, but the chances of referrals are slimmer and the carefully built brand made be tarnished.
To meet all these critical factors, a value system should be kept concise. In the case of Netflix and Spotify – which have proven incredibly successful – the principles are kept to no more than five. The idea is to have a simple, attainable message that resonates with clients and workforce alike. A list of more than five may prove counterproductive.
A value system forms the foundation of any successful business and as such they deserve to be carefully thought through. Critically they must reflect the founders’ own belief systems and have a proven positive impact on the bottom line.
Most successful businesses create values based on the initial founders’ value systems. These are effectively communicated throughout the business using a process that ensures those who are hired and those who remain employed, are committed to reflecting the values in their work. Importantly these values are truly representative of the business and its people, and the CEO is willing to ensure these are not compromised for short term gain.