A Role-model Values-based Organisation - Travis Hydzik

7/27/2019 A Role-model Values-based Organisation - Travis Hydzik

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A role-model values-based organisation

Travis Hydzik

Through its achievements and strong industry presence, Honeywell International demonstrates

itself as being an effective values-based organisation. This article will explore how this effective

values based approach was developed, how it is maintained and discuss the benefits of values-

based organisations.

Introduction

Honeywell International (Honeywell) is a diversified global technology company providing prod-

ucts and engineering services to private and public customers. Honeywell is located in ninety

countries with 132,000 employees worldwide (Honeywell International Inc, 2013a). Todays

Honeywell was formed through major mergers of AlliedSignal in 1999 and Pittway in 2000.

During the period after the mergers, Honeywells share price decreased; by year 2002 the share

price was lower by 70% from its peak prior to the merger. Only by year 2007, with the direction

of new leadership, did it recover back to pre-merger prices.

Currently, the stock remains the strongest in history with both the share price and dividends

out performing past history . Financially, over the last decade sales have increased 72% and free

cash flow has risen 100% (The Economist Newspaper Limited, 2012).

In early 2000s, Honeywell faced a number of environmental charges due to environmental vio-

lations and damages. As a result, in 2007 Honeywell established five year sustainability goals

for greenhouse gases and energy efficiency and by 2011 these goals where not only met but

exceeded. Presently, Honeywell has a comprehensive and active Corporate Citizenship program

and a number of sustainability initiatives (Honeywell International Inc, 2012).

David Cote joined Honeywell in 2002 as Honeywell Chairman and CEO transforming the com-

panys finance, culture and operations performance.

Values-based Organisations

The key component of a values-based organisation are the values. Influential research defined

values as a type of belief concerned with what is desirable and these beliefs were used as a criteria

for guidance (Rokeach, 1973). Rokeach (1973), through a values survey, classified values into

two groups of eighteen universal values. The two groups were terminal values, a desirable end-

states of existence and instrumental values, a preferable mode of behaviour. Schwartz and Bilsky

(1990, p. 550) defined values as conceptions of the desirable that influence the way people select

action and evaluate events. The current widely referenced classification of universal values is

that by Schwartz. Schwartz (1992) proposed that there are ten universal values, these are

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power, achievement, hedonism, stimulation, self-direction, universalism, benevolence, tradition,

conformity, and security.

More recent definitions of values are structures that involve the beliefs that people hold about

desirable ways of behaving or about desirable end states (Feather, 1995, p. 1135) and learned

beliefs that serve as guiding principles about how individuals ought to behave (Parks and Guay,

2009, p. 676).

Buchko (2007, p. 38) states organisation values as a specific set of ... stated beliefs or concepts

that are expected to be adhered to by everyone in that organisation . These organisational

values can be informal or formalised in writing and made available to employees, stakeholders

and the public (Buchko, 2007). Viinamaki (2012, p. 39) defines a values-based organisations as

an organisation where organisational values are defined and applied in leadership in terms of

increasing motivation of personnel, commitment, and reward.

Other research looks at the leaders themselves and suggests an organisation of leaders whoshare similar values forms a values-based organisations (Kraemer, 2011). Kraemer mentions

that one of the fundamental elements of values-based organisation are leaders who lead with

strong values. When researching establishing values-based leadership in hospitals, Graber and

Kilpatrick (2008, p. 194) recognised that leaders need to source organisational values from a

number of stakeholders, and once the values were chosen the leaders needed to continually

communicate the organisations values and work to assure that these values are not neglected,

but are enacted within the organisation. Viinamaki (2012, p. 42) discusses how leaders can use

organisational values in decision making, stating organisational values can be used as a source

of legitimisation, establishing creditability and trust, or alternative criteria for controlling andrewarding, and communicating the organisations mission and goals.

From here on a values-based organisation will be defined as, a culture of values and beliefs shared

by the organisation used to direct and shape decisions and actions.

Benefits of Values-based Organisation

One of the earliest notable works by Barnard, in his book Functions of the Executive suggested

shared values where useful in managing complex organisations by minimising employee divergent

interests (Barnard, 1968). Similarly, Takeda (2007) believes that a high value congruency be-tween employee and organisation can help minimise employee turnover. Honeywell, AlliedSignal

and Pittway merged with the aim of providing a complimentary product range and services.

However, the merger created three separate individual and disparate cultures and organisations

that did not know how to work together or may not have shared similar values.

One way of ensuring value congruence is by recruiting employees with values that align with the

organisations, this results in a high person-organisation fit. Sekiguchi and Huber (2011, p. 205)

states a person with a high level of person-organisation fit will be highly motivated to align

with organisational values and goals. Similarly Edwards and Cable (2009, p. 248) writes when

employees hold values that match the values of their employing organization, they are satisfied

with their jobs, identify with the organisation, and seek to maintain the employment relation-

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ship. One way for an organisation to have employees whose values match the organisation is by

employing those with values reflecting the desired organisational values. An employees starting

point for choosing a company to work for is commonly the recruitment page on the internet.

The Working at Honeywell section in the Honeywell Careers Centre website (Honeywell Interna-

tional Inc, 2013b) is Honeywells recruitment page. The Working at Honeywell page(HoneywellInternational Inc, 2013e) clearly communicates Honeywells core values, displayed through the

Five Initiatives (Growth, Productivity, Cash, People and Enablers), the Twelve Behaviours (Ap-

pendix A) and separate sections for Diversity and Corporate Responsibility, which introduces

Honeywells Hometown Solutions program. Research has also suggested that prospective em-

ployees are more likely to desire to work with a company if their personal values match the

organisations (Posner, Kouzes and Schmidt, 1985).

Further, employee and organisation value congruence can be obtained by directly relating value

congruency to rewards. Expectancy theory states that employees will be motivated if they

see a strong correlation between performance-outcomes. The theory emphasises the needsfor organisations to relate rewards directly to performance and to ensure that the rewards

provided are those rewards deserved and wanted by the recipients (Montana and Charnov, 2000,

p. 248). Honeywell directly measures employee performance against the Twelve Behaviours and

completion of employee defined goals, which occurs via annual and interim performance reviews.

The employees performance is marked directly against the completion of the years goals, as

a ranking of exceeds standards, at standards, or below standards. The goals are required to

align directly with Honeywells Five Initiatives. For example, a goal focusing on the Cash

initiative may be to, ensure all time sheets and expenses are completed in an accurate and

timely manner. Honeywells performance management process, measures employee performancedirectly against each of Honeywells Twelve Behaviours. The next step of the performance

management process involves identifying Behaviours for Future Development and allows the

reviewer to communicate those of the Twelve Behaviours which require further improvement.

The ratings of performance against the Five Initiatives and Twelve Behaviours directly affects the

employees pay remuneration for the year and well as their progression within the organisation.

Motivating employees with financial incentives is one way to improve employee behaviour to-

wards organisational values, performance can also be improved by developing employees ability

and skills. One way to improve employees ability and skills is through training. Vidal-Salazar,

Hurtado-Torres and Matas-Reche (2012, p. 2682) describes training as a planned process aiming

to directly influence the individuals knowledge, abilities and attitudes. Honeywells training

both directly and indirectly influences employees support and adherence of the core values. On

an annual basis, each employee is required to sit a mandatory online Code of Business Conduct

training based on Honeywells Code of Business Conduct (Appendix B) and includes real-world

examples and a final test to confirm the employee has understood the material. Honeywell

strongly follows Six Sigma tools and strategies for process improvement, each employee is re-

quired to complete compulsory training and work on a process improvement project as part of

their development. The Six Sigma program demonstrates Honeywells commitment to imple-

menting organisational values of innovation, progress and improvement. Similarly, all employees

are allocated forty-hours of technical training annually, which supports the core values pertaining

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to results, learning and technology advancement.

One study by Posner, Kouzes and Schmidt (1985) found that when there is value congruency

between leaders and organisation, there are significant benefits to both parties. Kraemer (2011,

p. 56) writes a values-based leader motivates the team members not only to do their jobs but

also to take ownership of their tasks and responsibilities. Honeywells leadership have com-

municated this directly to their employees. In a Letter from Honeywells CEO, David Cote

addressed the importance of Honeywells Code of Conduct, the leader states Im counting on

you to uphold our continued commitment to integrity at Honeywell. Quarterly, each business

unit holds a Town Hall meeting where the Presidents and CEO of each business unit communi-

cates strategic direction, quarterly performance to employees, highlighting acquisitions, awards,

financial highlights and areas to improve. The Five Initiatives are reiterated, with focus on

values such as sales, innovation, customer focus and recognition. In day-to-day activities, the

Five Initiatives are directly focused on during monthly team safety meetings, which enforce

Honeywells Health, Safety and Environment values.

Holbeche (2005, p. 375) states Employees understand what is real about these values, not

so much from what is written but from what is put into practice. Honeywell Hometown

Solutions(Honeywell International Inc, 2013c) is one example of putting values into practice.

Honeywell employees volunteer to help support local low-income home-owners with building

repairs, assist communities with child safety prevention and through the Honeywell Humani-

tarian Relief Fund (Honeywell International Inc, 2013d), volunteers support cities impacted by

natural disasters. All these activities enact values such as volunteering, selflessness, charity and

humanity, all of which are associated with Corporate Social Responsibility. Research supports

the importance of Corporate Social Responsibility especially to the millennial generation (those

born in or after 1980) when choosing a company (Ng, Schweitzer and Lyons, 2010) and as well

as retaining existing employees. Locally in Australia, Honeywell supports Clean Up Australia

Day, by encouraging employees to participate in cleaning up the environment during business

hours, it enforces company values such as sustainability and the environment.

The effects of these Corporate Social Responsibility values can be observed by the corporate

responsibility rewards received by Honeywell, including the award for Worlds Most Ethical Com-

panies by the Ethisphere Institute in 2008 and 2009 (Ethisphere, 2008, 2009) in the Aerospace

and Defence category. Ethisphere ranks companies on an Ethics Quotient (Ethisphere, 2013),which takes into account the Ethics and Compliance Program, Reputation, Leadership and In-

novation, Governance, Corporate Citizenship and Responsibility and Culture of Ethics. The

Culture of Ethics criteria specifically looks at how ethics values are adopted in the organisa-

tion. Similarly the Reputation, Leadership and Innovation category ranks the organisation on

how their leaders promote values of business ethics and responsible and sustainable business

practices. These items are all part of Honeywells organisational values.

A further example is the winning of the Malcolm Baldrige National Quality Award in 2009

(Quality Digest Magazine, 2010), this award ranks companies on leadership, strategic planning,

customer focus, measurement, analysis, and improvement of organisation performance, work-

force focus, process management and results. Again these values of customer focus, leadership,

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and results are organisational values, many seen in Honeywells Twelve Behaviours.

Implementing a Values-based Organisation

Soon after his commencement as CEO of Honeywell, David Cote implemented a number of

strategic changes, including implementation of core values through the Five Initiatives, and the

Twelve Behaviours.

The process of moving to a values-based organisation is similar to all organisational changes,

and follows change management practices, which includes phases of planning, implementation

and evaluation (Hiatt and Trimble, 1998). In this case, planning would involve choosing organ-

isational shared values or core values, implementation includes the procedures and operations

of how these values are embedded into employee culture. Finally, evaluation would measure the

outcome of the success of the organisations values and the extent to which they are understood

and supported.

Wenstp and Myrmel (2006) have surveyed the values of three-hundred American companies

and have discovered organisational values fall into three main categories, core values, protected

values and created values.

Core Values attitudes and characters of an organisation, these values are observed in

Honeywells Code of Business Conduct (Appendix B) and include integrity, respect, diver-

sity and trust.

Protected Values values protected through rules, standards and certifications, these values

are written in Honeywells Health, Safety, Environment, and Sustainability (HSES) policyand Environmental and Safety Goals, these values include health and safety of employees

and stakeholders, and protection of the environment and sustainability initiatives.

Created Values values to meet stakeholder expectations, these values can be observed in

Honeywells Five Initiatives, which include Growth, Productivity, Cash, People and the

Three Enablers. These values are incorporated into the employees annual goals.

Honeywells Twelve Behaviours (Appendix A) are values that are incorporated into all three

main categories.

Whilst Honeywell does achieve its implementation of core values, there are other ways it can

be improved. Brandes and Stuber (2004) discusses developing and institutionalising core val-

ues in a mid-sized community college, with particular attention to institutionalising the values

through high presence and personalisation. During research it was observed that there was

very little presence of Honeywells Code of Business Conduct or Twelve Behaviours throughout

the workplace, including meeting and lunch rooms. Currently, employees are directly reminded

about these values during mid and final year reviews and quarterly meetings, the presence of

these around the work place would help to constantly remind employees through out the year.

Similarly, the Twelve Behaviours should be embedded in trainings and team meetings.

Brandes and Stuber (2004, p. 1) also discusses personalising the values, several departments

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... further explored and detailed how they live the values within their programs. This assisted

staff to personalise the values according to the unique profile and focus of their department.

Honeywell has a number of business units including Aerospace, Automation and Control Solu-

tions, Performance Materials and Technologies and Transportation Systems, and it may be an

effective approach personalising the values for individual departments. Performance Materialsand Technologies would value research and ingenuity higher, compared to the others which value

safety and customers.

Hofstede (2001) proposed six different cultural values that varied between countries, these are

Power Distance, Individualism versus collectivism, Masculinity versus femininity, Uncertainty

avoidance, Long-term versus short-term orientation, Indulgence versus self-restraint. Honeywell

has employees in over ninety countries, including the major regions of Africa, Americas, Asia

Pacific, Europe and the Middle East, with the consistent Code of Business Conduct and Twelve

Behaviours being implemented internationally. The behaviour Champions Change for example,

which expects individuals to adapt and be supportive of organisational and business change,may not be a high priority for countries with high Uncertainty Avoidance such as those in Latin

America. Though, Honeywell does account for cross-cultural differences with country specific

policies, and the Twelve Behaviour Global Mindset directly addresses this.

Conclusion

By establishing core values across the organisation, CEO David Cote has transformed Honeywell

from a company with unclear disparate values as a result of the mergers of AlliedSignal and

Pittway into an effective single values-based organisation. The initial development of core valueswere introduced in the forms of Honeywells Code of Business Conduct, Twelve Behaviours and

Five Initiatives.

Once introduced, these values were integrated into employees work life through ensuring re-

cruited employees have a high value congruence with the organisational values, directly relating

rewards to performance of value compliance, communicating the values through leadership and

enacting the values both internally and publicly.

These changes have created a company with higher stakeholder return, higher shareholder prof-

its, less environmental impact, and improved customer focus.

While the implementation of the above measures has proven to be effective for the organisation,

there are further opportunities to embed the Five Initiatives and Twelve Behaviours in the

companys day to day activities. As the company grows with its various divisions, personalising

values may also be an effective way to harness individual division focus.

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A Role-model Values-based Organisation - Travis Hydzik