Value in Organisations

No organisation can escape the truth that it can only exist if the things it does is valuable. For value to exist someone has to consider it to be so. So who does? Is it the customers? The shareholders? The board? Leaders or the workers? It is true they all have a view of what value the organisation has. But is it consistent

W. Edward Deming once wrote, “The aim of the system must be clear to everyone in the system”. He was, in part, talking about the purpose of an organisation. In conjunction with his further statement, “The aim is a value judgement”1. He highlights the link between purpose and value. Purpose has a strong role to play in determining what is valuable. Value is the judgement that validates action and builds cultural norms. Thus it is a thinking construct of leaders and workers. Value is in the mind of the doer.

But value isn’t something that exists in our heads born out of pure purpose. It’s constructed from behaviour. Frederick Herzberg makes a point that, “values are not precursors to behaviour. They are the results of behaviour.” For instance if we look at the Agile Manifesto. Those chaps didn’t construct the values from pure imagination. But from their experience developing software. The behaviour they exercised lead them to a view of what they considered to be valuable. Herzberg can confirm this in a further in his statement. “You develop a behaviour pattern, then you develop an attitude and a value system that justify your behaviour. All values do is enable you to read an environment to see whether your behaviour is acceptable.2” The Agile Manifesto then acts as a high level set of rules to see if your behaviour is acceptable. As we can see values are the building blocks of culture.

Double Meaning

As a word value does not have a single meaning. Which often lends itself, in reference to things, to be used in abstract or concrete ways. For an organisation that poses a problem. If the values of its people are not congruent, productive action will be impossible.

Value also appears as a universal in organisations as money. Not an invention of the organisation, but a civilised way of placing value on goods and services, and therefore on things that are done or made; revenue and costs. Here value is a number, a monetary unit that can have all arithmetic and statistical operations applied. A thing that can be counted.

We can now say there are broadly two meanings of value. The first being a social in nature, what is valued by an individual or group. The oxford dictionary defines it as the regard that something is held to deserve; the importance, worth, or usefulness of something.3 The second, a number; quantity, that is derived from a measurement representing how much on a scale. Both technical and commercial in nature. In the context of organisations these two meanings have something in common, they drive judgement.

Judgement

People have value (qualitative) systems to make judgements about their situation, decide if things are ok or not, raising the intention to take action of some sort. Organisations are made of people and they have to make judgements in their work, about other’s action4, and be judged by others. Its essence is about distinguishing important things from unimportant.

Values as quantities are often referred to as data; symbols representing objects and events. A basis for information, much of it stored in IT Systems. In organisations we want useful information on things that are valued; not just any information. But the capability and capacity of these IT Systems has lead to the capture of everything and anything that can be stored. Almost with little regard for why it should. And with that comes claims that it is valuable because of its untapped potential.

Information helps answer questions like who, what, when, where, and how many. For example: How many items are in stock, how many people do we have, how long do they take, percentage of types. Presented in forms like dashboards, reports, charts, alerts, spreadsheets, custom software applications and the like. This information gives us an opportunity to compare. Numbers help rank or order things according to a scale but it doesn’t decide what or why something is important. They are only facts.

In this context of value a philosophical question for organisational decision making emerges. Should we act on what is important or should we act because there is more or less of something? Importance and volume are clearly different. They appear to some as opposite ends of a judgment continuum. What do the numbers say or go with your gut? Numbers hide unknowns.5, facts without a story, as explained in the previous paragraph. Using your gut is a metaphor for invoking your value system, albeit unconsciously. In both cases you don’t know why, as much as you might rationalise it. For organisations this judgement can only be derived from purpose. When an organisation knows it’s why at all levels, it becomes simpler for leaders and everyone to decide what is important and what is not.

Exchange

Value is often associated with exchange. Between people we can model an exchange in simple terms of there being a giver and a taker of the thing being exchanged. The giver has a view of value that it produces towards the taker. And the taker assesses the value of what it has received. At each end of the exchange exists a value system held by the people involved in the exchange. The thing of value is exchanged but value does not; it is realised by the beholder. Sometimes the giver will try to validate value with the taker to ascertain compatibility. This can only be achieve at the end of the exchange. What the taker transmits is a semblance to the giver of what they valued. And because of the givers perceived ideals of value, they will never truly approach perfection. What tagoochi called Nominal Value. Simply put, there is much variation in what is and was valuable in any exchange.

Transferring this model to organisations. We can identify he giver as the organisation and the taker as the customer. What is different is that the value system of the organisation is cultural; a social construct. In Mark Schwarz’s book, “The Art of Business Value”, he concludes that business value, simply put, is what the business values. If we assume the organisation is the business, it makes sense to call the value system of the organisation “Business Value”. Further, If we take Mark’s conclusion we can infer that the value system of a customer is called “Customer Value”.

Business and Customer Value

If Business Value is what the organisation values and Customer Value is what the customer values, these value systems must have a symbiotic relationship. But there is a catch. There is no Business Value without Customer Value. No business can be successful without a customer valuing what it produces or the organisation will suffer financial death. Customer Value can live on, finding an organisation that values it. This then leads towards a certain logic. Customer Value is an attitude of Business Value. Business Value must in some minimum way have a view of Customer Value operating within its value system. What a business values has to comprise of elements of what it believes to be valuable to their customers.

A good example of this I found in Edgar Schein’s, Organisational Culture and Leadership.6 At Digital Equipment Corporation (DEC), engineers built up certain standards (Business Value) about what customers valued in computers; their attitude to Customer Value. Over time what customers valued in computers shifted as examples of potential computers emerged from other organisations. But the engineers of DEC didn’t alter their attitude toward customer value. As Schein put it: “they (engineers) used their own standards for evaluating what a customer expected; they over-designed them and built in far too many bells and whistles, which made the computers too expensive and too hard to use. The DNA of the DEC culture never changed.”7

DEC found out the hard way, that what it valued wasn’t sustainable. With in it Customer Value was frozen. It also demonstrates that what the customer views as important changes over time. It appears then for an organisation to remain viable a primary principle of Business Value must exist: “Value the building of knowledge about what the customer values over time”

Agile

Much of Agile’s commentary has been towards the idea that value is delivered incrementally. And that in Scrum the Product Owner is the arbitrator of value; what is worth working on and what is good enough. The team as such is subjected to proxy to value. This is a combination of what the product owner believes and what they have interpreted from the user. They have to submit to the product owner’s own values and this seems to come about easily. For example I’ve been part of many inceptions where 30 or more stories are produced representing a future wish that has the potential to be valuable not to the product owner but the users of the it. Yet a product owner decides what is most valuable at any given moment.

Conclusion

Value is a critical element of organisational purpose. Without it people who work in them will have to make up their own values leading to misguided effort. Leaders are best positioned to establish and course correct value systems.

  1. W. Edwards Deming. The New Economics for Industry, Government, Education (Kindle Location 435-437). Kindle Edition. ↩

  2. Page 44, The Managerial Choice ↩

  3. Oxford Dictionary, accessed 9/2/2018 ↩

  4. Before you might say judging people is a bad thing. To make the distinction between good and bad things, including behaviour, we all have to make judgements. Much of this is non conscious. ↩

  5. the most important figures that one needs for management are unknown or unknowable (Lloyd S. Nelson, director of statistical methods for the Nashua corporation), but successful management must nevertheless take account of them.

    Out of the Crisis, Page 121 ↩

  6. 5th Edition. ↩

  7. 5th Edition, pages 336 - 337 ↩