Siemens agreed to pay compensation in a bribery case. The Managing Director of Total Italy was arrested on bribery charges. In the United States, a former Nasdaq chairman was arrested over allegations of fraud exceeding 50 billion dollars. These stories appeared in newspapers within the space of only a few weeks, and there is little doubt that they represent merely the tip of the iceberg. The financial crisis involving hedge funds in the United States illustrates the point we have reached. Criticism of the business world is not limited to these events. Pollution caused by patterns of production and consumption is pushing the ecological system toward an unsustainable point. Toxic waste discovered buried in a field in Tuzla is one example. Decisions made by business executives who are not held accountable create social inequalities and lay the groundwork for social unrest. The events in Greece at the end of 2008 may be counted among the most typical examples.

These developments should not be met with despair, especially by people with a high level of awareness. They herald a new era. There must be a reason why so much negativity is occurring. We need a new consciousness and a new perspective. As Einstein observed, problems cannot be solved at the same level of consciousness that created them.

We are certainly living through highly dynamic and interesting times. Old patterns of belief are being questioned, and we stand on the threshold of transformation. Transformations have generally occurred alongside a crisis. As we entered 2009, we were said to be experiencing one of the most severe crises of recent times. Our greatest hope is that this crisis—triggered by the financial collapse and deepened by economic stagnation—will lead us to question the selfish and greedy paradigm that dominated twentieth-century business and help us reach a new level of consciousness. In short, we need a new model and a new approach. In this article, we take a more holistic view of business and propose a new model: Managing by Values.

Achieving Competitive Advantage

In the twenty-first century, five critical issues occupy the top management of every company, large or small:

• Increasing profitability and company value
• Attracting and retaining talented people
• Building brand loyalty
• Embedding ethical values in organizational culture
• Creating a sustainable, crisis-resilient company

In today’s business world, both competitive advantage and brand differentiation depend on creating a successful, values-driven organizational culture. In the public sector as well, organizational culture is the most important source of quality service. Alignment between corporate and employee values increases commitment to the company and produces high levels of trust, harmony, and productivity together with innovation and responsibility. In addition, when employees’ efforts to achieve company goals carry a meaning beyond salary, their passion and energy emerge more strongly, positively affecting everyone—especially customers.

Studies conducted in many companies to investigate the relationship between values and corporate success have reached the following conclusion:

“Values-Driven Companies Are the Most Successful Companies.”

This is due to the relationships among the following variables:

• Values orientation and vision create a successful organizational culture
• A successful organizational culture creates employee satisfaction
• Employee satisfaction creates higher customer satisfaction
• Higher customer satisfaction increases stakeholder income

What Are Values, and Why Are They So Important?

In the simplest terms, values are the set of principles people adhere to when making decisions. Individuals express their adopted values through behavior, while organizations express theirs through culture. Research shows a strong positive relationship between a company’s financial success and the alignment of organizational and employee values. From this perspective, “Who are you?” and “Why do you exist?” become as important as the quality of your products and services.

In Corporate Culture and Performance, John P. Kotter and James L. Heskett emphasize that organizations with highly adaptive cultures built on shared values are visibly more successful than others. They reached this conclusion through an eleven-year study. The research found that adaptive, values-driven companies grew four times more than other companies during that period. Kotter and Heskett also showed that these companies created seven times more employment and that their share prices rose twelve times faster.

Research seeking to identify the core characteristics of long-lived companies found the following common features:

• A strong, positive, values-driven culture
• Commitment to learning and renewal
• Continuous adaptation based on signals from inside and outside the company
• Strategic collaboration with internal and external stakeholders, customers, and suppliers
• A willingness to take risks and explore new areas
• Balanced, values-based measurement of company performance, taking into account:
  • Corporate survival and continuity (financial results)
  • Organizational health (productivity, quality, etc.)
  • Collaboration with customers and suppliers
  • Continuous learning and renewal
  • Organizational alignment and employee satisfaction
  • Contribution to society and the environment

We know that many companies fail to develop these qualities and consequently fail to survive. The primary reason is that they view the organization as a machine when conducting business. Managers therefore focus only on profitability and the most basic relationships. Yet companies are living entities with an identity. Like people, they have physical, social, intellectual, and spiritual needs. Organizations that intend to survive for the long term must develop these dimensions.

Development, Needs, and Values

From childhood onward, human beings pass through three basic stages in the development of consciousness. Companies, as living entities, pass through these stages as well:

Stage One: At this stage, the individual tries to survive and gain autonomy. The focus is the self and individual needs. We may call this stage “egocentric.”

For a company, this stage includes its most basic needs: ensuring profitability, surviving, and protecting employee health and safety.

Stage Two: At this stage, the individual forms a group with family or other people and focuses on group needs rather than individual needs. The focus is the group to which the person belongs. For the organization, the focus is the company itself.

Stage Three: Healthy and independent groups develop mutually supportive relationships with other independent groups. The individual’s focus is now neither the self nor the group, but all humanity. We may call this stage “world-centric.” A world-centric individual or organization considers all people and the universe and uses the maximization of holistic benefit, rather than individual gain, as a decision criterion.

The renowned eleventh-century Turkish writer and thinker Yusuf Has Hacib addresses the individual-versus-society dilemma in Kutadgu Bilig (Wisdom of Royal Glory):

“Do not pursue your own interest; seek the people’s interest.

See your own interest within the interest of the nation.”

From this, we can say that individuals and organizations can fundamentally work for two kinds of benefit: individual benefit and common or social benefit. This work generally seeks to meet three basic needs. Through individual benefit, we satisfy our physical and emotional needs; through social benefit, our spiritual needs. Our intellectual needs are met through the learning and development that enables the transformation from an individual focus to social benefit (Figure 1).

Richard Barrett applied this approach to companies and their needs, developing a model of organizational levels of consciousness. Barrett argues that for companies to endure, they must consider every level of consciousness and satisfy the needs listed above. Based on this model, he developed tools that measure leadership behavior and the prevailing organizational culture through the values representing each level of consciousness.

The first three levels represent a company’s basic needs: profitability, customer satisfaction, and efficiently functioning structures and processes. The emphasis is on protecting the individual interests of the company and its shareholders. At the final three levels, the focus shifts to internal cohesion, mutually beneficial collaboration, and the company’s role in society. The emphasis is on the overall benefit of all stakeholders—employees, customers, the environment, and society. The fourth level represents the company’s transformation from a fear-based, rigid, authoritarian approach to one that is more open, inclusive, adaptive, and empowering.

Companies or institutions that focus only on the first three levels may achieve short-term success, but cannot lead their industries. They are too rigid, bureaucratic, and inward-looking to empower employees or adapt to changing environmental conditions. Employee motivation is low, people are driven by fear, and innovation is constrained.

Companies that focus only on the final three levels lack the basic business capabilities needed to operate. They are ineffective, financially inadequate, and struggle to keep promises made to customers. In short, they have not understood the realities of business. We will now examine all the levels of consciousness through which companies can operate according to this model.

All Levels of Consciousness

To operate successfully and remain resilient in the face of crises and challenges, companies must be able to act skillfully at every level of organizational consciousness (Figure 2):

• Level 1: Focus on financial stability and employee protection
• Level 2: Focus on open communication, personal respect, and customer satisfaction
• Level 3: Focus on performance, results, and best practices
• Level 4: Focus on adaptability, innovation, employee empowerment, and continuous learning
• Level 5: Focus on increasing cooperation and mutual support by building a strong culture based on shared vision and values
• Level 6: Focus on partnerships with like-minded organizations, coaching and mentoring managers, and developing environmental awareness
• Level 7: Focus on social responsibility, ethics, global thinking, and a long-term view of the impact of business on future generations

Each of the seven levels of organizational consciousness is explained below.

Level 1: Survival Consciousness

The most basic need of a business is financial survival. Without profit or regular financing, a business cannot continue to exist. Financial stability is therefore the first concern of every organization.

Success at the survival level of consciousness requires a healthy focus on the break-even point. When companies become trapped at this first level and their insecurity about the future deepens, they develop an unhealthy perspective centered on shareholders’ short-term financial gain. The rush to prepare quarterly financial figures for the stock market causes managers to overlook all the other factors necessary for business success.

This situation leads to inward-looking, risk-averse management based on excessive control and caution. For a company operating at this level, acquisitions take precedence over strategic cooperation, yet their aim goes no further than exploiting the assets of the acquired organization. Managers who remain at this level view people and the world as resources to be plundered. When required to comply with rules, such companies focus only on meeting minimum conditions. Businesses experience their greatest fears at this level. Success requires strong financial performance together with a focus on protecting employees. Companies that cannot make a profit cannot invest in employees, develop new products, or build strong relationships with customers and the public. Financial stability is the first and most important need of every company. Recognizing that employees are the company’s greatest asset also demands serious attention to occupational health and safety at this level.

Level 2: Relationship Consciousness

After financial stability, an organization’s second major need is harmonious human relationships and healthy internal communication. Without good relationships with employees, customers, and suppliers, it is impossible for the organization to survive. The central issue at this level is building loyalty and belonging among employees and a sense of connection between customers and the organization.

The prerequisites for creating belonging are open communication, mutual respect, and valuing employees. Care develops through friendship, sensitivity, and listening. When these are established within an organization, employee and customer loyalty and satisfaction reach very high levels. Traditions and rituals also help strengthen these relationships. Conversely, anxiety about belonging and a lack of respect lead to disloyalty, disagreement, and eventually fragmentation.

At this level, when managers meet behind closed doors or fail to communicate transparently, employees begin to imagine the worst-case scenarios. Cliques then emerge, and rumors begin to spread. When managers focus more on individual success than on organizational interest, they compete with one another. As managers defend their own territories, blame, internal competition, and information hoarding become widespread, increasing cultural entropy—disorder.

Family businesses often operate at this level, primarily because the family struggles to trust managers from outside the family.

Level 3: Self-Esteem Consciousness

At the third level, companies focus on performance and measurement—on operational indicators. The organization seeks to become the best by adopting successful methods and concentrating on quality, efficiency, and effectiveness. Systems and processes receive strong emphasis, and strategies are developed to achieve desired results. Business process reengineering, Six Sigma, and Total Quality Management are among the methods used to address the performance concerns of this level.

Another critical issue at this level is creating a culture of continuous improvement. Encouragement and the recognition of success are prerequisites for such a culture.

Organizations at the self-esteem level adopt hierarchical structures to maintain centralized control. This hierarchy creates advancement opportunities for successful employees focused on their individual responsibilities. Yet the vertical structure often serves little beyond managers’ need for personal recognition, status, and self-esteem. To maintain centralized control, these companies establish rules and regulations for every function.

Organizations centered on self-esteem consciousness can easily degenerate through power centers, rigid and autocratic bureaucracy, and internal competition. Unless the organization can shift its focus from inward to outward, failure and collapse may become inevitable.

Level 4: Transformation Consciousness

Organizations at the transformation level focus on adaptability, employee empowerment, and continuous learning. The critical question is how to mobilize innovation so the company can develop products and services for market opportunities. Innovation requires flexibility and a willingness to take risks.

To respond fully to this level, the organization must value the ideas and views of every employee. Each person must feel that their voice is heard. Managers must accept that they cannot know everything and do not possess all the answers, and therefore seek active employee participation. Doing this effectively depends on developed emotional intelligence. A major responsibility for managers at this level is to achieve high performance by acting as facilitators for a broad employee group seeking equality and “freedom through responsibility.” They must remember that employees prefer to be held accountable rather than controlled through constant supervision.

One of the most important dangers at the transformation level is excessive emphasis on consensus. Consensus is certainly valuable, but making a decision is more important.

Another route to success is enabling employees to think and act like entrepreneurs. They receive greater responsibility, the hierarchy becomes flatter, teamwork is encouraged, and personal development and relationship capabilities are strengthened. Individual differences are treated as valuable sources of new ideas. Although this paradigm shift brings freedom and equality together with responsibility, desired results are impossible unless all employees and teams share the same purpose and direction. The unity of purpose and direction required for success makes the transition to the fifth level necessary.

Level 5: Organizational Alignment Consciousness

The fifth level focuses on building cultural integrity and increasing the capacity to act together. Managers must set aside their individual agendas and work for the common good. The critical task is to create a shared vision for the future and a shared set of values. A shared vision clarifies the organization’s intention for employees, provides a unifying purpose, and establishes direction. Shared values guide employees in decision-making. When values are expressed through behavior, the boundaries of freedom based on responsibility become clear. Values and behaviors must permeate all organizational systems and processes so that inconsistencies between words and actions are prevented.

A climate of trust is a prerequisite for success at this level. Justice, transparency, and merit are the foundations of trust. Aligning employees’ individual roles with the organization’s vision creates engagement and enthusiasm at every level. People who live their passion become more productive and creative.

In level-five organizations, failures are lessons and work is enjoyable. The key to success is building a strong, positive, and authentic identity that distinguishes the organization from its competitors. Culture thereby becomes part of the brand. This is especially important in service businesses, where employees are in close contact with customers and the public.

Because this and subsequent levels are built upon organizational culture, companies make a special effort to preserve and develop that distinctive culture.

Level 6: Making a Difference Consciousness

Organizations at the sixth level focus on strengthening relationships both inside and outside the institution. Internally, they seek to enable employees to derive spiritual fulfillment through work; externally, they build collaboration and partnerships with other companies, local public institutions, and civil society organizations. In other words, the company develops relationships aimed at mutual benefit with all stakeholders. The critical issue is that employees and customers see the organization as a structure that changes the world and makes a difference through its products and services, cooperation with the local community, and support for causes serving humanity. Employees and customers should feel that the company genuinely cares about both them and the future. Organizations at this level go the extra mile to demonstrate responsible citizenship—for example, encouraging employees’ voluntary social activities by granting time during working hours and/or financially supporting the service activity.

At this level, the organization offers employees an environment in which they can develop themselves. It supports all professional and personal development efforts, and everyone helps one another. The fundamental condition for success is developing leaders with strong empathy. These leaders must understand that their task is not only to guide the organization but also to serve the people who work for them. They must create a climate that helps employees form a healthy connection between their personal mission and the organization’s vision and mission. Another responsibility is developing talent through mentoring and building talent pools for succession planning. Leadership and leadership development therefore carry great significance at this level.

Level 7: Service Consciousness

The seventh level extends the focus of the previous level by carrying internal and external relationships much further. Internally, it builds a climate grounded in ethics, humility, love, and compassion. Externally, it works at local, national, and global levels toward a sustainable future for humanity and the planet. The essential task is to develop an advanced awareness of social responsibility throughout the organization. At this level, the organization is closely engaged with social justice and human rights as well as ecological balance and global environmental issues.

Service consciousness requires a commitment to selfless service and a firm belief in the public interest and the well-being of future generations. For success, the company must adopt the highest ethical standards in its relationships with all stakeholders—employees, customers, shareholders, government, the public, and others. It must also consider the long-term consequences of every decision and action.

Final Word

The problems caused by the paradigm that has dominated business for the past fifty years threaten our future. The way out of our present difficulties is to move to a new level of consciousness. We must go beyond concern for individual or corporate interests—and even beyond nationalism. Individually and collectively, we must consider the benefit of us all. We must abandon short-term thinking and consider the effect of our actions on future generations.

Our awareness that we live in a global, interdependent world grows every day. The actions of a company—especially a large corporation—or a country affect not only itself but everyone on earth. We face two choices: either we put aside exclusive individual and national identities and work together as humanity for the common good, or we continue living amid the pain and chaos around us.

Businesses are a major part of our world; the budgets of many multinational companies exceed those of countries. An approach limited to making money, minimally satisfying employees, and improving procedures will not ensure long-term continuity. Companies must create learning environments, align employees around a shared vision, develop partnerships with stakeholders, and do work that benefits society and the environment.

If we ask where and how to begin transformation and change, identifying our company’s current level of consciousness is a good starting point.

Note: I thank Prof. Dr. Acar Baltaş for the translation of the figures and concepts, and Aykut Şen for his translation of the “Seven Levels of Consciousness” section.

Dr. Hüseyin Çırpan

References

James C. Collins and Jerry I. Porras, Built to Last: Successful Habits of Visionary Companies, (New York: HarperCollins) 1994.

John P. Kotter and James L. Heskett, Corporate Culture and Performance, (New York: The Free Press) 1992.

Ken Wilber, A Brief History of Everything, (Second Edition, Shambhala) 2000.

Richard Barrett, Liberating the Corporate Soul: Building a Visionary Organization, (Butterworth-Heinemann) 1998.

Richard Barrett, Building a Values-Driven Organization: A Whole System Approach to Cultural Transformation, (Butterworth-Heinemann) 2006.

Simon L. Dolan, Salvador Garcia and Bonnie Richley, Managing by Values, (Palgrave Macmillan) 2006.