September 2006 Archives

Archive for September, 2006

Linking Financial Values and Cultural Values

September 29th, 2006 | Author: Bruce Lewin

The financial and cultural values of an organisation often appear to be two separate and distinct entities. However, simultaneously linking and managing them can have a major impact on the success of both strategy and its execution.

Typically, the financial values of an organisation do not mirror the cultural and behavioural values of the organisation. Financial values are the aspects of financial performance that are measured, rewarded and recognised. Examples such as revenues, return on equity, profit margins and share valuations are all included in here. Internal examples include the setting of targets and milestones, while the market may define price levels or influence market share and investors seek dividends or increases in the share price for example.

Contrast the financial values with the cultural values that firms often use in the form of mission statements, desired behaviours and emotional commitment. Such cultural values are highly likely to be defined internally (either deliberately or casually) and take the form of training programs, grading systems or competencies for instance. Ownership of such values may be with the board, HR, or it may lie with a combination of stakeholders. The point of this comparison is to say that often, financial and cultural values are defined and managed by entirely separate and distinct tools and processes [1].

The following example seeks to contrast two airlines [2]. Table 1 below shows a near perfect match between cultural values, as taken from their respective websites. Yet, despite the similarity, Brand 1 is a low cost, short haul, budget airline whilst Brand 2 flies long haul and emphasises their luxurious customer experience. Comparing financial values, differences are in margins, the cost base, customer segmentation, distribution channels and levels of competition for example.

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