The Power of Words Reinforced by Deeds

Let’s dig deeper by looking at a very concrete example from a seemingly prosaic sector: the insurance industry.

You might recall my mention of PURE Insurance in chapter 3. At one point fairly early in the company’s evolution, its executives realized that traditional “insurance thinking” ultimately could lead to a bad outcome: the company’s pricing teams might be tempted to follow the industry practice of overcharging loyal long-term customers in order to subsidize below-market prices that would bring in new business. To head off this outcome, PURE published its pricing philosophy online, which reminded all constituents of the company’s overarching goal of caring for existing members (such as me). The effort continues today, with the company sending annual reports and other communications to members, intended to hammer this point home with regularity. Finally, the company provides a cost reduction once members reach their fifth renewal and offers cash distributions (further reducing net coverage costs) after ten years of membership.

Obviously, that message—although aimed at the outside world—is not lost on internal constituencies, including those pricing teams that otherwise might be tempted to stray off the path.

Similarly, I receive annual reports from First Republic Bank highlighting the bank’s core values, along with plenty of stories from customers about how First Republic has impacted their lives.² “The stories of our clients are the story of our bank,” as the headline on the bank’s email to me read, which by the way strikes me as a pretty compelling way to talk about true customer centricity. In a recent report, those stories were followed by a section labeled “Who We Are and What We Value.” As the name implies, the ensuing text consists of biographies of First Republic’s senior executives and board members. These in turn were followed by an illustrated list of corporate values (figure 8-1).

FIGURE 8-1

First Republic Bank core values

Reproduced by permission from First Republic Bank.

Take a moment to read the short paragraph of text under each value. Also take a look at the implied priorities signaled by the sequence in which those values are presented. I think it’s not accidental that “do the right thing” and “provide extraordinary service” are top-line values, while priorities such as “grow” and “have fun” come later down the list. Be sure to notice the clever illustrations—symbols that help make these values memorable. In the early 2000s founder, chairman, and CEO Jim Herbert felt that it would be vital to clarify these values so the organization could maintain its service-oriented culture as it continued to grow.

First Republic’s chief operating officer, Jason Bender, explained to me that this project was one of his first assignments after joining the bank out of Stanford Business School. “I was tasked with joining our CMO, Dianne Snedaker, on a road trip to visit with over one hundred employees around the country,” he said. “We weren’t looking for aspirational principles; we just asked people what it is that really makes us us?” The resulting list represents their distillation, what they heard from the organization explaining what made their culture special.

It isn’t such a different list at FirstService Residential—which you’ll recall is the nation’s leader in condominium and homeowner association management—but in that context, the task of clarifying values and getting people to rally behind them presented a much greater challenge. Rather than being built around the values of an individual founder—such as Jim Herbert at First Republic—FirstService Residential was created through the acquisition of a number of independent regional competitors around the country, each with its own distinct culture and values.

That was the challenge faced by Chuck Fallon in 2013 when he took the reins as CEO of FirstService Residential. One of his first priorities was to create across these separate companies a single culture that was bound together by common values and systems. With strong encouragement from Chuck, the regional teams came together and hashed out the list illustrated in figure 8-2, which was broadly published and promoted in literature and now adorns the entry wall in every regional office:

FIGURE 8-2

FirstService Residential: our values

Note, again, the power of simple declarative value statements, reinforced by symbolic illustration. (I for one am pleased that “be genuinely helpful” tops the list.) In your mind’s eye, picture these statements up on the wall, larger than life—collectively a powerful symbol—in the entryways of all the company’s major workplaces.

Chuck reconvened the leadership team and asked its members to define the behaviors that would indicate teams were living these values. They came up with fifteen service standards that helped define what Chuck describes as “what good looks like.” For example, the team decided that to “be genuinely helpful” required nonemergency email requests to be answered quickly—certainly within twelve hours. Fallon’s next move was to create a system of daily huddles known as FirstCall. In these small-group meetings, team members recounted their own experiences (or challenges) in acting on one or more of these values and service standards. This is essentially the same system originated at the Ritz-Carlton hotels by cofounder Horst Schulze. He built these daily stand-ups on one central insight: values don’t really come to life unless teams talk about them regularly in a structured way, and the best process involves team members telling their own stories about how a given principle affected them personally.

Another routine that Chuck is experimenting with allocates at least one huddle each quarter to a somewhat different approach. Team members are each asked to select the value they feel the team is doing the best job at embodying and to give an example that illustrates why they feel this way. Next, they identify the value in most need of improvement—again with an illustration. Through this process, each team (and each unit within the larger hierarchy) focuses on values well lived and on areas where improvement is called for. This helps make those values both personal and shared. And the fact that this happens repeatedly, over time, reflects the core prescription of this chapter: be persistent.

One of my favorite examples of the power of publishing core principles is Discover’s so-called Culture Book.³ You’ll recall my description of Discover from previous chapters: a notably customer-focused credit card issuer and payment network. The Culture Book was one of the first things I was handed when I made my initial visit to Discover’s headquarters north of Chicago several years back to interview the company’s senior executives. It’s a bright orange 140-page booklet made available to all Discover employees that declares the firm’s core principles. Those principles are worded and sequenced so that they spell out the word “DISCOVER”:

• Doing the right thing
• Innovation
• Simplicity
• Collaboration
• Openness
• Volunteerism
• Enthusiasm
• Respect

Each value is illustrated with stories told by employees explaining how they have attempted to live by those principles at work.

As I soon learned in my interviews, the Culture Book was seen as only a first step. The company’s leaders next developed systems and rituals to reinforce those principles, such as the ritual by headquarters staff welcoming Pinnacle of Excellence Award winners with a standing ovation from employees looking down from every floor of a four-story atrium. These customer-facing reps were nominated and voted on by their peers using the following criteria:

• Are the employee’s behavior and results consistent examples for others?
• Does the employee have a strong reputation in our culture?
• Will peers be excited for the employee?
• Does the employee have a strong sense of pride or gratitude for Discover?

This ovation shows respect for the winners and for the values-based process by which they were chosen. The ritual demonstrates Discover’s high esteem for the role of customer service representatives. So too does the process whereby all executives listen in on a couple of hours of customer service representative calls every month, then meet with their colleagues to discuss what they learned and what process or technology changes would help make the work of the customer service representatives easier—and thereby help them delight customers.

Discover’s principles are also reinforced by the executive bonus system. The senior execs in charge of marketing and operations have a joint bonus target that’s based on reducing the number of customer complaints by 10 percent every year. Again, this calls for creating practical systems that keep values such as innovation and respect at the forefront of every team’s priorities.

Amazon’s Fourteen Principles

Amazon too is built on the rock of core principles.⁴ In an interesting twist, the company has chosen to be explicit about how leaders should embody those principles, as expressed in this list on the company’s website:

Customer Obsession

Leaders start with the customer and work backwards. They work vigorously to earn and keep customer trust. Although leaders pay attention to competitors, they obsess over customers.

Ownership

Leaders are owners. They think long term and don’t sacrifice long-term value for short-term results. They act on behalf of the entire company, beyond just their own team. They never say “that’s not my job.”

Invent and Simplify

Leaders expect and require innovation and invention from their teams and always find ways to simplify. They are externally aware, look for new ideas from everywhere, and are not limited by “not invented here.” As we do new things, we accept that we may be misunderstood for long periods of time.

Are Right, A Lot

Leaders are right a lot. They have strong judgment and good instincts. They seek diverse perspectives and work to disconfirm their beliefs.

Learn and Be Curious

Leaders are never done learning and always seek to improve themselves. They are curious about new possibilities and act to explore them.

Hire and Develop the Best

Leaders raise the performance bar with every hire and promotion. They recognize exceptional talent, and willingly move them throughout the organization. Leaders develop leaders and take seriously their role in coaching others. We work on behalf of our people to invent mechanisms for development like Career Choice.

Insist on the Highest Standards

Leaders have relentlessly high standards—many people may think these standards are unreasonably high. Leaders are continually raising the bar and drive their teams to deliver high quality products, services, and processes. Leaders ensure that defects do not get sent down the line and that problems are fixed so they stay fixed.

Think Big

Thinking small is a self-fulfilling prophecy. Leaders create and communicate a bold direction that inspires results. They think differently and look around corners for ways to serve customers.

Bias for Action

Speed matters in business. Many decisions and actions are reversible and do not need extensive study. We value calculated risk taking.

Frugality

Accomplish more with less. Constraints breed resourcefulness, self-sufficiency, and invention. There are no extra points for growing headcount, budget size, or fixed expense.

Earn Trust

Leaders listen attentively, speak candidly, and treat others respectfully. They are vocally self-critical, even when doing so is awkward or embarrassing. Leaders do not believe their or their team’s body odor smells of perfume. They benchmark themselves and their teams against the best.

Dive Deep

Leaders operate at all levels, stay connected to the details, audit frequently, and are skeptical when metrics and anecdote differ. No task is beneath them.

Have Backbone; Disagree and Commit

Leaders are obligated to respectfully challenge decisions when they disagree, even when doing so is uncomfortable or exhausting. Leaders have conviction and are tenacious. They do not compromise for the sake of social cohesion. Once a decision is determined, they commit wholly.

Deliver Results

Leaders focus on the key inputs for their business and deliver them with the right quality and in a timely fashion. Despite setbacks, they rise to the occasion and never settle.

“We use our Leadership Principles every day,” the preamble to the preceding list says, “whether we’re discussing ideas for new projects or deciding on the best approach to solving a problem. It is just one of the things that makes Amazon peculiar.”

I do like that use of the word “peculiar.” I wish it weren’t true—I wish that adhering to leadership values such as these didn’t make a company an outlier—but I think it is. May more companies go this route and thereby make Amazon less peculiar!

I believe that the larger idea stated above is also true. My interviews with current and former Amazon executives have convinced me that these principles do get discussed every day and are thoughtfully embedded into every management process—from hiring to training to promotions and, of course, to how the company treats customers. Note that not a single word of these fairly comprehensive principles has to do with revenue growth or profit targets. That is refreshing in a world all too often dominated by financial-capitalist thinking. Note too that several ideas recur in different words. For example, leaders “never say ‘that’s not my job,’ ” and no task is beneath a leader. Leaders “look for new ideas from everywhere,” “are never done learning,” “are curious about new possibilities,” and “look around corners.” When it comes to inculcating values, a purposeful reiteration can be a powerful aid.

Despite the firm’s extraordinary performance, though, there is something troubling about Amazon’s fourteen principles: the Golden Rule is not apparent. No principle refers to treating employees with loving kindness or caring deeply for their safety and well-being. And there is nothing about “treating people right.” So, if there’s one part of the Amazon model that makes me wonder if its success is sustainable, it’s the firm’s failure to dedicate itself to becoming a truly great place to work where employees can lead great lives.⁵

In his 2020 annual report’s letter to shareholders—his last as CEO—Jeff Bezos seemed to share this concern.⁶ The company had just beaten back a unionization drive at its Bessemer, Alabama, facility, winning 71 percent of the vote. Even so, the experience clearly affected Bezos, who noted in his letter, “We need to do a better job for our employees.” He went on to make this commitment: “We have always wanted to be Earth’s Most Customer-Centric Company. We won’t change that. It’s what got us here. But I am committing us to an addition. We are going to be Earth’s Best Employer and Earth’s Safest Place to Work.”

Only time will tell if Amazon will be able to adjust its culture in this direction. Any company as large as Amazon has regular opportunities for executives to make poor decisions—decisions that are pro-profits but anti-love. One such policy recently uncovered by the Wall Street Journal is Amazon’s throttling of competitors in smart speakers and video doorbells by refusing to sell them key ads on its website, which could boost their search results.⁷ The Wall Street Journal also published accusations by sellers on Amazon Marketplace that Amazon employees were gleaning data from the marketplace platform to compete unfairly. How quickly these transgressions get resolved in favor of the Golden Rule—assuming they do!—will indicate how well Amazon’s principles are holding up under the constant financial pressures of a public company.

Even without missteps, any giant company—whose success was accelerated by a pandemic that brought suffering to so many—can easily become viewed as hateful and exploitive. There are indications that Bezos recognized this long ago. For example, when the firm surpassed $100 billion in sales, he composed and distributed a memo titled “Amazon.love” in which he declared that he wanted the company to be loved rather than feared. “Defeating Tiny Guys is not cool,” he wrote. “Capturing all the value only for the company is not cool.”⁸ Now that Bezos has passed the CEO mantle to Andy Jassy, the world will get a chance to see how committed this new generation of leaders feels to living Golden Rule principles.

With these serious cautions and caveats in mind, any company striving to become more customer-centric should study Amazon’s example of putting principles into practice explicitly, systematically, and persistently. The company’s overarching precept—the principle at the very top of its list—is “customer obsession.” Note that many of the subsequent principles serve to support and reinforce the concept of customer obsession: for example, “invent and simplify” and “insist on the highest standards.”

“Persistence” also comes to bear on the arc of an Amazon manager’s career. Here are some excerpts from a conversation I had with a former Amazon executive who described the way the company embeds its leadership principles in its system of management:

• As a job applicant, you are interviewed based on those principles.
• Starting on day one, you are trained in them.
• When you interview others, you have to vote “yes” or “no” strictly on whether they passed on the leadership principles, which are more important than their experience or skillset.
• The feedback you provide your peers is based on the leadership principles.
• The all-hands meetings are themed around the leadership principles.
• Your promotion documents are written based on how you perform against these leadership principles.
• You get “managed out” if you don’t demonstrate that you can deliver against the leadership principles.
• Working within these principles isn’t a choice at Amazon, not just a recommendation or a nice-to-have—it’s the foundation of what it means to be an Amazonian. It’s a relentless commitment to excellence. You’re either in it 100 percent or you’re out.

Amazon’s management systems also interlock in ways that reinforce customer focus. For example, to earn promotion to a senior role, leaders must be able to point to a string of innovations that have made life better for customers. But delivering those kinds of innovations requires funding, of course, and the system that controls the funding of new initiatives requires the sponsor to write up a simulated press release that explains the novel features and benefits of the innovation, which must be remarkable enough to be considered newsworthy by journalists. The package must also include expected questions (with answers) about how the service will be delivered, what resources are required, and what the schedule is. In other words, the sponsor must demonstrate that he or she understands how this innovation will wow customers and what it will take to deliver the innovation on time and within budget. Only after someone has cleared these rather high hurdles repeatedly is that person considered for a senior management role.

I will be watching Amazon carefully as its new generation of leaders begins the next chapter in the company’s history. Hopefully the transition will work as effectively as it did at Apple, where Tim Cook took the baton from founder Steve Jobs and demonstrated even greater commitment to treating customers and employees right. Apple’s success is evidenced by its continued growth but also by its stellar Net Promoter Scores. But the truth today is that NPS results for Amazon point to a dark cloud on the horizon: Amazon’s relative customer NPS rankings have been slipping in most of its retail categories. Bain’s Retail Practice, which examines ten sectors each year, reported that in 2020 Amazon held the leading Net Promoter Score in only one sector: home furniture. Since 2017 Amazon’s competitors have led in most categories and by a different competitor in each sector. I conclude that Jassy and his team have their work cut out for them. I hope they respond by aligning their core principles with the Golden Rule and follow them with even greater persistence.

More Than Words

At the risk of stating the obvious, simply publishing a list of inspiring values is insufficient. Persistence and symbols must be undergirded by both principles and systems and, most important, by the example set by the company’s leaders. How persistently do they embody those principles?

Remember the implosion of Enron, which sent senior execs to jail for their unprincipled pursuit of profits? That once high-flying company turned out to be a clear example of talking the talk without walking the talk. For example, here are the four corporate values Enron celebrated in one of its annual reports:

• Communication—We have an obligation to communicate.
• Respect—We treat others as we would like to be treated.
• Integrity—We work with customers and prospects openly, honestly and sincerely.
• Excellence—We are satisfied with nothing less than the very best in everything we do.⁹

In retrospect, this is kind of depressing to read, right? But it is no more so than the case of Arthur Andersen LLP. That huge accounting firm, which employed some eighty-five thousand people, collapsed almost overnight thanks to its ties to Enron (as well as Waste Management, Sunbeam, and WorldCom). And this disaster happened despite Arthur Andersen LLP’s very public embrace of a set of seemingly robust values that had been passed down through several business “generations” from the firm’s founder:

• Integrity and Honesty
• One Firm, One Voice Partnership Model
• Training to a Shared Method¹⁰

So no, it’s clearly not value statements, however eloquent and lofty, that set great firms apart from the rest. Instead, it is leadership’s ability to build reinforcing systems to ensure that these principles live and breathe throughout the organization. And it’s the leadership team’s willingness to act as exemplars in living those principles, especially when the chips are down. Will leaders put principles and team success ahead of their own personal interests when things get rough?

The problem is that you never know until the moment actually arrives. I was impressed at how quickly the FirstService board elected to slash board member and senior executive compensation when the Covid-19 crisis hit the company’s frontline teams. I think this will be critical as we move forward through this crisis and into the next one—whenever that comes. All employees will be watching to see how hard leaders work to avoid crisis-driven layoffs and how generously they compensate themselves if they decide they must cut frontline jobs. At the risk of stating the obvious, there is no better way for leaders to drive home their commitment to principles than to make meaningful sacrifices themselves in the service of those principles.

Steve Grimshaw understood this, which is why he and his senior team slashed their compensation when Caliber Collision entered the pandemic-driven downturn. Pay was reduced for everyone with an annual salary of over $100,000. Caliber committed to keeping all its locations open (while competitors shuttered up to 50 percent). Then Grimshaw guaranteed body techs a healthy base rate of pay even if their weekly shop volumes failed to cover that base through their standard volume incentives. My guess is that when the collision industry returns to pre-pandemic levels, Caliber’s rate of share gain earned during the pandemic will further accelerate. The reason? Leaders demonstrated to everyone (employees, vendors, insurance companies, and customers) that Caliber lives its principles.

Pathways to Persistence

I’ve already described a number of the systems Bain has implemented over the years to ensure that the firm’s client-focused mission—to help our clients create such high levels of value that together we set new standards of excellence—remains front and center and also to make sure that mission is presented powerfully and persistently. Let me reiterate just a few. Weekly huddles, for example, ask team members to evaluate how well their work is delivering client value. In parallel, the “annual results” challenge motivates teams in every office worldwide to vie for recognition for delivering the best client results.

Another core principle supporting our mission is making Bain a great place to work. In support of that principle, we ask team members every week how likely they would be to recommend their team to colleagues in the larger organization. Those responses drive huddle discussions so that teams can fix most of their own issues, but in addition, aggregated results roll up to the monthly office meeting, where teams are rank-ordered. These scores inform key office management decisions ranging from coaching to team resourcing. The scores are also shared across the office with all consultants and associate consultants, which focuses even more attention on the challenge of making teams fun and productive. And in what is perhaps the most powerful system of all, teams vote on the quality of their leadership every six months, and leaders who do not earn the support of their teams cannot be promoted to a position of greater power and authority.

My point again is that values—even powerful values—need help. Yes, as I’ve just emphasized, leaders must behave as exemplars and live the values. But they must also reinforce cultural values by building effective systems. Those systems yield persistence. They just keep humming in the background, 24/7/365, even when people aren’t consciously aware of their impact or cumulative power.

You don’t have to take my word for it. The following is an excerpt from a story in the Boston Business Journal that was based on an interview with Tamar Dor-Ner conducted shortly after she was appointed the new head of Bain’s Boston office:

When Tamar Dor-Ner joined Bain & Co. in 1999 after studying European intellectual history at Northwestern, her plan was to stay for six months. “I thought I would do an anthropological expedition,” she said. “I would observe businesspeople in their natural habitat, and I would leave to write the Great American Novel of the workplace.”

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She never left. Two decades later, Dor-Ner is running Bain’s Boston office—at just under 1,000 employees, the consulting giant’s largest location—and leading the brand positioning and strategy group that she co-founded. It’s Bain’s culture, she said, that convinced her to turn her expedition into a long-term encampment.…

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Far from corporate drones, she found her co-workers smart, funny and hard-working. “I got here and felt pretty immediately an alignment of values, insofar as the people I liked were the people everybody respected and admired and they were the people that got promoted,” Dor-Ner said. “The people that I thought were (jerks), they were flushed pretty quickly out of the system like toxins.”¹¹

The “alignment of values” to which Tamar refers is, on the face of it, an unexpected congruence between her own values and those of her new colleagues. But on a deeper level, I think, Tamar was picking up on the cumulative impact of Bain’s persistent systems. Why did the people she admired get promoted and the jerks get flushed out? This was because of values, published explicitly and reinforced systematically and persistently. I believe that the reason Bain recovered from its near-death experience thirty years ago was not because of a new set of brilliant strategic initiatives; it happened because we returned to our core mission of helping clients achieve great results through servant leadership. And we designed systems that persistently reinforced the principles that underpinned that mission. That’s why people such as Tamar decide to stay at Bain and make it an even greater place to work.

Perhaps you’re inclined to dismiss Bain as a special case—an exclusive club with so many high earners with multiple degrees from fancy-pants schools. But the same principles and reinforcing systems drive success across the entire business spectrum. For example, consider the experience at one of FirstService Brands subsidiaries, CertaPro Painters, the largest franchised residential and commercial painting company in North America. The leaders of CertaPro recently presented their business strategy update to their board of directors, on which I serve. They explained to us that the reason they chose gold as the company’s color—prominently featured in all advertising and signage—is to communicate that the company tries to live by the Golden Rule.

This is part of a bigger picture. In fact, all the FirstService Brand companies strive to live by these values:

• Deliver what you promise.
• Respect the individual.
• Have pride in what you do.
• Practice continuous improvement.

When I asked Charlie Chase, CEO of FirstService Brands, to explain how these were chosen, he replied that these values simply reflect “different dimensions of the Golden Rule, which work equally well in our painting business, home inspections, restorations, floor coverings, and California Closets.”

I think Charlie is right. Every list of core values at successful firms simply parses the Golden Rule into components that make it more practical and understandable for its employees in that particular business setting. When I asked Charlie to describe how FirstService Brands developed systems and rituals to reinforce these values and make them persistent, he said that first the company turned those values into the following “Service Basics” to help teams know when they were living these values:

• Ensure your words and actions align with our Brand Promise.
• Display our Brand with pride.
• Create Brand loyalty with everything we do.
• Practice immediacy.
• Engage customers to tell their story only once.
• Educate, communicate and collaborate with the customer.
• Solicit feedback from customers throughout their journey.
• Be prepared, present and personal.
• Respect the customer’s property and preferences.
• Celebrate and confirm completion of the project with the customer.

Charlie also explained the ritual that FirstService Brands holds each year to identify the people in its organization who are doing the best job of living these ideals. The ritual is called the Golden Rule Awards, a peer-nominated process that culminates in the selection of four winners from each brand: one customer-facing sales team member, one customer-facing production team member, one franchise general manager, and one headquarters staffer. Winners attend the annual FirstService Brand Experience Summit and are brought onstage to tell their own stories, reflecting on the core values and brand-serving basics. These stories come to define what it means to live by the Golden Rule and set the standard of excellence for employees and executives throughout North America.

When financial analysts ask Charlie or his boss Scott Patterson to explain why FirstService can continue to outgrow and outperform many of its competitors across its business lines or how it can continue its remarkable track record of total shareholder return—imagine, a company composed of mature business lines such as residential property management, painting, home restoration, and custom closets delivering returns over the decade on par with Amazon and Apple—they notice that those analysts are not usually looking for answers such as ensuring that our teams are ever more diligent and persistent in living the Golden Rule. But in fact, that is a big part of the answer.

Love and Persistence

Wise leaders recognize that currents with the force of Niagara will try to sweep your favorite koi back downstream. The vast majority of employees, customers, investors, and society presume that the primary purpose of business is profits. No matter what business fad or pop philosophy is being preached, people believe what leaders do much more than what they say. They observe bosses continuing to set budgets, allocate capital, measure success, and pay bonuses based primarily on financials. So, if you want your message to love customers to be taken seriously, you had better back up those words with carefully designed culture, ritual, and systems that reinforce the Golden Rule.

Let me remind you of the famous passage about love read at many wedding ceremonies. It is taken from St. Paul’s first letter to the Corinthians:

Love is patient, love is kind. It does not envy, it does not boast, it is not proud. It does not dishonor others, it is not self-seeking, it is not easily angered, it keeps no record of wrongs. Love does not delight in evil but rejoices with the truth. It always protects, always trusts, always hopes, always perseveres.

In the case of love for customers, I think the case is clear that love can only persevere with plenty of systematic help from committed leaders.