Leadership

How CEO Values Affect Company Performance

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Top organizational leaders receive the highest compensation, because the direction they provide is largely responsible for the success of companies. One of the primary ways that CEOs (Chief Executive Officers) affect the way their companies operate is by sharing the different sets of values they possess. A person’s value set includes his or her beliefs regarding acceptable modes of conduct in particular situations, acting as principles which guide behaviors. A CEO’s values set the stage for the culture of the organization, which in turn influences its growth, efficiency, and member behavior. Through the strategic decisions they make, CEOs impress their values upon the culture of the organization.

How Culture Is Affected by Values

The way organization members enact, or articulate, their personal values help to create a shared meaning which forms the culture of an organization. An organization’s culture can be seen through its norms and rituals. Three frequent types of culture consistently seen across organizations are:
  • Innovative: demonstrated through entrepreneurial, creative, and risk-taking behaviors.
  • Bureaucratic: seen through an emphasis on rules, consistency, and structure.
  • Supportive: seen in trust, encouragement, and collaborative relationships.
Each type of culture is associated with a different set of CEO personal values. Because CEOs are primarily accountable for the success or failure of an organization, they are responsible for making sure the organization’s culture is able to keep up with the changes to the organization’s environment. The way CEOs are able to modify an organization’s culture is likely to echo pieces of their own personal value systems. The sets of personal values that correspond most closely with the three types of organizational culture are:
  • Self-direction – making one’s own choices, expressing free thought, and having independence.
  • Security – having stability, preserving order, and maintaining predictability.
  • Benevolence – having concern for others, attending to their needs, and establishing supportive relationships.
It follows then that the three value sets correspond to the cultural types in this way:
  • CEOs who value self-direction, tend to lead highly innovative organizations.
  • CEOs who value security, tend to lead highly bureaucratic organizations.
  • CEOs who value benevolence, tend to lead highly supportive organizations.

Organizational Outcomes Related to CEO Values

An organization’s culture (influenced by the CEO’s values) contributes to different performance outcomes. The particular outcomes experienced depend on the values a CEO impresses upon its organization’s culture.
  • CEOs valuing self-direction, who lead innovative organizations, tend to experience outcomes such as high sales growth.
  • CEOs valuing security, who lead bureaucratic organizations, tend to experience outcomes like efficiency, though sometimes elicit negative employee satisfaction.
  • CEOs valuing benevolence, who lead highly supportive organizations, tend to experience outcomes like greater employee satisfaction.
The relationships between the sets of CEO values, organizations’ cultures, and likely performance outcomes are straightforward. Other potential combinations between the value dimensions, cultural aspects, and performance outcomes are not as likely. For example, bureaucratic organizations that emphasize stability and predictability are unlikely to foster creativity and risk-taking. Likewise, organizations with a strong focus on the needs of its employee’s are likely to have difficulty promoting other incompatible organizational goals, like sales growth.

Practical Implications:

In order for the links between the values, culture, and likely outcomes to be fully understood, CEOs must increase awareness of their value systems. Identifying how one’s values fit with different cultural aspects can help CEOs find the appropriate balance between their own values and the needs of the organization’s culture in order to achieve desired outcomes. For example, organizations needing to invigorate themselves to remain competitive might choose to enact a more innovative culture that is counter to the CEO’s preference for security and stability. In such instances, the CEO may choose to depend on the (more culturally compatible) values of other executives for leading the organization in a new direction.

Interpretation by:

Kathleen Melcher

DeGarmo Group

This was a summary of the research and practice implications from: Berson, Y., Oreg, S., & Dvir, T. (2008). CEO values, organizational culture, and firm outcomes. Journal of Organizational Behavior, 29, 615-633.
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