The 21st Century has created some unique opportunities for companies to expand into markets that have been closed for hundreds of years. In fact, globalization and the Internet have created new opportunities for businesses. However, with the opening of new markets, leaders have been forced to create value for their organization to remain competitive in the global market. Thus, a modern form of leadership has surfaced that centers on values and ethics (Viinamaki, 2009). The intent of this post is to explore values, values-based leadership, value creation, and stakeholder value. Initially, a definition will be created that explains values, values-based leadership, value creation, and stakeholder value. In addition, I synthesized the literature to identify if the literature supports values-based leadership. Through the process, a statement will be developed to elucidate the impact values-based leadership makes on organizational performance, employees, and stakeholder value.
Definitions
Assessing the literature on values, Viinamaki (2009) explained that, “values are at the heart of organizational behavior and leadership” (p. 6). Similarly, Rue (2001) stated, “Values are the essence of who we are as human beings. Our values influence every decision and move we make, even to the point of how we choose to make our decisions” (p. 12). Values are a shared set of goals, means and objectives created within an organization by a leader (Buchko, 2007; Meglino & Ravlin, 1998). Jenson (2002) expanded the value notation further and explained that value maximization is where leaders make decisions to improve the market value of an organization for the long-term. Therefore, a working definition of value is the heart and essence of organizational operations, where decisions are based on a shared set of goals, means, and objectives to improve an organization.
In the grand scheme, values are the impetus for values-based leadership. For example, Pruzan (1998) argued that a leader continuously infuses the notion of organizational and stakeholders’ values into an organization’s culture while creating values-based perspective when managing an organization. Dean (2008) defined values-based leadership as “leading by example, that is, doing the right thing for the right reasons and not compromising core principles” (p. 61). Accordingly, Mintzberg, Ahlstrand, and Lampel (2005) and Schein (1985) argued the significance of sharing values to create a firm organizational culture. Along the same lines, Mussig (2003) discovered that “values-driven leadership sets the function of the relationship as putting values into practice” (p. 73). In essences, values-based leadership is founded on moral values of integrity, empowerment and social responsibility (Reilly & Ehlinger, 2007).
Value creation has been defined from two perspectives, customer service and customers perception of values (Naslund, Olsson, & Karlsson, 2006). Gronroos (1997) defined value creation as offering a core value as a solution with some additional service. Similarly, McCracken (1993) argued that value creation is an organization’s brand meaning to consumers when they describe their actual and future standing. Naumann (1995) and Zeithaml (1988) posited that value creation is exceeding customer expectations or improving benefits while reducing costs. Thus, a functional definition for value creation is providing consumers with additional features or services that surround a product or increase the core benefits of product.
Stakeholder value is based on the belief in social responsibility, which is where responsibility is valued over profitability (Charreaux & Desbrières, 2001). In fact, Freeman, Harrison and Wicks (2007) argued that stakeholder value is where an organization advocates for organizational success to be measured when all stakeholders are satisfied with the value of the organization. Similarly, Harrison, Bosse and Phillips (2010) discovered that an organization should not only be viewed as a resource for shareholders, but needs to be a coalition among customers, suppliers, employees, and society.
Synthesis of Concepts
After assessing the articles covering values-based leadership, Klenke (2005) found that work values, leadership values, and spiritual values are instrumental to effective organizational cultures that can be cultivated with values-based leadership. Watson, Papamarcos, Teague and Bean (2004) discovered two ways for organizations to attain value-congruence, which are through selection and turnover or to transmit organizational values via media or culture. Thus, when a values-based leader is managing the organization, they could transmit their values and beliefs onto their followers. When decisions arise within an organization, Keeney (1993) defended the use of the value-focused thinking paradigm that has three components. Leaders should articulate their values, value articulation needs to proceed all activities, and values are necessary to identify alternative decision opportunities.
Fletcher and Smith’s (2004) analytical hierarchy processing framework is supportive of values-based leadership. In fact, the authors reported their framework identifies values drivers within an organization and a method that monitors implemented strategies in real-time. Fletcher and Smith (2004) discovered that values-based management and leadership “shows potential for providing a solid platform for sustained growth and profitability” (p. 15). On the other hand, Jensen (2002) is critical on relying on values or intuition, because values and intuition are counterproductive and move in the opposite direction. Jensen is critical because there is not a proper measuring device that can identify if an organization is improving or losing value. Lastly, Fuqua and Newman (2004) and Russell (2001) discuss the importance of values and the impact they make on leaders. Fuqua and Newman (2004) argue for the use of the systems theory, which implies a shared responsibility to planning and implement change. Russell (2001) encourages leaders to examine their personal and professional beliefs prior to examining the values of the organization.
Impact of Values-Based Leadership
Values-based leadership will have a huge impact on organization performance, employees, and stakeholder value. In fact, Woodruff (1997) found that when values-based leadership is coupled with shareholders and stakeholders’ assistance, then organizational performance is increased. In addition, the key to increased performance is based on close cooperation between a leader and consumers. Essentially, consumers are providing feedback to improve the effectiveness of products, management, and leadership. Correspondingly, values-based leadership can make a direct impact on employees and the manner in which they fit into the organization (Papamarcos et al., 2004). In fact, Papamarcos et al. (2004) explained that the values-based leadership model is based on transmitting organizational values through the development of a strong organizational culture that ensure employees are retained and have greater job satisfaction. The greatest impact values-based leadership makes, is on creating a higher level of corporate social responsibility. For example, Charreaux and Desbrières (2001) argued that stakeholder value is most effective when a values-based leader focuses on creating value for stakeholders and society. In sense, value is created when stakeholders are also benefiting from the profits of an organization (Freeman et al., 2007).
Conclusion
Value is an interesting phenomenon that occurs within organization. The various definition of value, values-based leadership, value creation, and stakeholder value all parallel a common theme, which is to create value for employees, customers, stakeholders and society. The emphasis is to create value by focusing on social responsibility rather than profitability for only shareholders. The readings from the module support values-based leadership as a means to increase performance, employee job retention and satisfaction, and stakeholder value. However, Jensen (2002) was critical of values-based leadership because he believed there is not an appropriate measuring device to differentiate between improved and decreased value. Lastly, values-based leadership will impact the overall performance and value of an organization by providing an alternate perspective to the way leaders approach management and the operation of an organization.
References
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