The Hidden Values Driving Strategy

Leaders’ subconscious biases can influence their choices of growth strategies.

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A growing cadre of managers is recognizing that their companies’ long-term prospects depend on demonstrating positive societal impacts.1 To that end, they’re taking pains to clearly articulate what they and their organizations value. This is helping them to define meaningful business goals, appeal to customers, and motivate a rising generation of workers who seek purpose, not just a paycheck.

But in doing all this, leaders tend to focus on values that are consciously held and shared in their organizations, such as sustainability or diversity and inclusion. They often fail to recognize how their very personal subconscious values — for instance, how much they value debate versus harmony — influence how they make plans and decisions and achieve their goals.2 These subconscious values shape our organizations’ strategies and tactics by directing our focus and influencing which plans we make and how we implement them.

Our research and consulting experience suggests that our values are among the biggest drivers of our strategic decisions. While conscious values may be clearly articulated by the CEO or other leaders, our very personal subconscious values are frequently not acknowledged. And knowing our values is crucial. As long as they are implicit, we can’t recognize and work to counter our biases.3

In our consulting experience, we have observed that leaders’ subconscious values particularly affect three aspects of their strategic decision-making: how and where they grow their businesses, how open they are to new ideas and new ways of solving problems, and how they interact with people. Within each of these areas, individuals typically lean toward one of two opposed values.

Our personal attitudes toward growth are shaped by how much we value security or embrace risk.4 Are we very risk averse, or can we tolerate uncertainty? Keep in mind that there is a significant difference between saying that we like risk and actually taking risks.

Our openness to new ideas and processes is influenced by whether we value learning or knowing.5 Are we willing to accept new ways of solving current problems, or do we stick with what we know has worked in the past? And, more important, how much do we value the intellectual development of ourselves and our team?

How we relate with people is based on whether we enjoy debate or prefer harmony. Do we suppress critical points of view to preserve harmony in the team? Our inclinations in these cases also reveal what kind of people we prefer to work with — those who are more confrontational or those who are more conformist.

Identifying Our Subconscious Values

Leaders who want to surface and understand the subconscious values that drive strategy creation need to interrogate themselves honestly. Given that our values affect both business and personal decisions, introspection about our preferences and behavior can yield insight into our hidden values.

To start this reflection process, use our assessment tool (see “What Values Drive Your Leadership?”) or simply consider the following questions: When it comes to personal investing, do you keep your savings in risky equities or stash them in capital-preserving funds? The answer to this question can indicate your tendency along the growth dimension. When it comes to interacting with people, do you enjoy a good argument or find those engagements stressful? And how do you feel about relying on existing knowledge versus developing new ideas? Now imagine your retirement: Are you more interested in finding ways to share your expertise or in signing up for classes to learn about a new subject?

The answers to these questions offer a starting point for better understanding which of the opposed values we lean toward in each of the three areas — growth, ideas, and people.

How Our Values Shape Our Strategy

We make hundreds of decisions, large and small, that reflect our subconscious values. Whether we decide how aggressively to push for innovation, how much risk we are willing to accept, or how we enter new markets or territories, in all of these situations our values shape our choices, frequently without our being aware of it. For instance, favoring security or embracing risk will lead to drastically different strategic choices.6 When we tend toward risk, we will be more likely to explore new opportunities and create a bigger push for innovation or even disruptive projects. When our value system is more directed toward security, we will opt for a steadier path toward growth and choose multiple smaller projects to balance risk.

When our values lean more toward knowing than learning, we may like the status quo both in terms of our own as well as our team’s development. Rather than exploring new technologies, processes, or management practices, we prefer to stick to what we know.7 On the other hand, if we value learning, we will create an environment in which new ideas flow freely, we recruit people who have new ideas, and the development and growth of our people is a natural priority. This value dimension may thus also drive how we approach innovation and how open we are to change.

Regarding our values toward people, a tendency toward diversity means that we value discussion and a diverse set of opinions that also allow us to experiment. We believe that a certain level of arguments spices things up and leads to better results in the team.8 In contrast, if our value system favors harmony, we will create a more homogeneous team, in which quick discussions are the norm and decision-making is aligned. When creating a strategy, homogeneous teams may be less open to new trends and developments and thus tend toward a more steady strategy.

In summary, we can argue that the more our orientation is inclined toward risk, learning, and debate, the more our strategy will focus on dynamic adaption and innovation, whereas the more we lean toward security, knowing, and harmony, the more our strategy will favor a more consistent and long-term orientation.

Are Our Values Aligned With Our Company’s Goals?

Tim Cook is not Steve Jobs. Yet both executives led Apple at the right time — one in a phase of disruptive innovation that created an industry of its own, and one in a period of steady and strategic growth that made Apple the first company to surpass a valuation of a trillion dollars.

While it is crucial that leaders’ conscious personal values are aligned with their organization’s stated values, their subconscious values must also align with the approaches needed to attain organizational goals. Without that alignment, the executive’s values may drive the company in an undesirable direction with every major decision that is made.

Most of the time, we take for granted that executives’ values are aligned with their company’s goals. But often, that’s not the case, and it’s tough to address that, because values are stickier than we think and cannot be changed easily.9 In addition, many people are not even aware of their subconscious values or have not thought about how they shape their decisions and strategies.

Executives must have or develop sufficient insight into their own subconscious values to understand, and sometimes override, their tendencies — because they will scale their values throughout the entire organization.10 This is a consequence not only of the decisions that they make, but also the culture they create and whom they choose to hire. Many studies have shown that executives tend to hire employees who are like themselves and share their values.11 This creates a hidden force that underlies the company culture and affects every strategy, innovation, and transformation implemented in the organization.

Building the Right Teams for Change

As leaders, once we better understand our own values, we need to ask ourselves whether they match the goals of the company or division we are in. Maybe if we prefer growth and innovation, there is a new and upcoming business that we can manage rather than working to sustain a core business. And conversely, an executive oriented toward security and harmony might not be the best candidate for running a high-growth or new division.

If change is needed either by restructuring or by designing and implementing new strategic initiatives, senior executives should carefully consider the value dimension when deciding who should be responsible for carrying out the project. This is true both for individual executives and for teams.

Ensuring that the values of a team tasked with implementing change are aligned with the new company goals is crucial. This creates a common subconscious pull toward the desired outcome. It motivates the team and translates into a unified focus and strategy. This fit between the team and the revised goals can support transformation of the organization by gradually changing people’s mindsets and practices and ultimately aligning them with the new company goals.12

Examining ourselves and honestly recognizing our deep-seated preferences in the areas of risk, new ideas, and interpersonal relations can be challenging and uncomfortable. But the more self-knowledge we bring to decision-making, the better able we are to manage the extent to which we allow our subconscious values to steer our choices — and potentially move beyond our natural comfort zones to better align decisions with company goals.

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References

1. L. Fink, “Larry Fink’s 2018 Letter to CEOs: A Sense of Purpose,” BlackRock, Jan. 16, 2018, www.blackrock.com. Fink tied long-term success with not only delivering financial performance, but also making a positive contribution to society.

2. D.C. Hambrick, “Upper Echelons Theory: An Update,” Academy of Management Review 32, no. 2 (April 2007): 334-343.

3. P. Meissner, O. Sibony, and T. Wulf, “Are You Ready to Decide?” McKinsey Quarterly 2015, no. 2 (April 2015): 18-23.

4. W.H. Stewart Jr. and P.L. Roth, “Risk Propensity Differences Between Entrepreneurs and Managers: A Meta-Analytic Review,” Journal of Applied Psychology 86, no. 1 (February 2001): 145-153.

5. C.S. Dweck, “Mindset: The New Psychology of Success” (New York: Random House, 2006).

6. D. Lovallo, T. Koller, R. Uhlaner, et al., “Your Company Is Too Risk-Averse: Here’s Why and What to Do About It,” Harvard Business Review 98, no. 2 (March-April 2020): 104-111.

7. J.M. Nebel, “Status Quo Bias, Rationality, and Conservatism About Value,” Ethics 125, no. 2 (January 2015): 449-476.

8. A. Parker, C. Medina, and B. Schill, “Diversity’s New Frontier: Diversity of Thought,” Rotman Management Magazine, fall 2017.

9. M. Spiegel and T. Schmiedel, “What Makes Change Harder — or Easier,” MIT Sloan Management Review 58, no. 3 (spring 2017): 88-89.

10. S. Arieli, L. Sagiv, and S. Roccas, “Values at Work: The Impact of Personal Values in Organisations,” Applied Psychology 69, no. 2 (April 2020): 230-275.

11. L.A. Rivera, “Hiring as Cultural Matching: The Case of Elite Professional Service Firms,” American Sociological Review 77, no. 6 (December 2012): 999-1022.

12. H. Ibarra, “Take a Wrecking Ball to Your Company’s Iconic Practices,” MIT Sloan Management Review 61, no. 2 (winter 2020): 13-16.

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