Conflict to Congruence with Value Creation
In this article, I wish to argue that there is a link between the internal conflicts we have as individuals, the distrust we have of businesses and other institutions, the divisions we see in society and conflicts between nations. Recognising the link provides insights into resolutions that also offers the prospect of a positive step change in progress and prosperity for the individual, businesses, the economy, societies and nations.
Personal Internal Conflicts
In 1957 Leon Festinger wrote, “A Theory of Cognitive Dissonance” to describe the anguish we feel when we perform actions that contradict our personal beliefs, ideas and values, or when we are confronted by new information that contradicts them. It results in a psychological inconsistency that we find discomforting in varying degrees and can lead to stress, anxiety and all the related mental and physical health consequences. This goes a long way to explaining why the culture of organisations is important if we want people to be highly engaged and productive, and if we wish them to be happy with, and loyal to, their employers. Poor understanding of this might partially explain why so many people are actively disengaged at work (according to large-scale international research projects by Gallup and others), and why some countries, such as the UK, face a productivity crisis.
Growing Distrust
Richard Barrett of the Barrett Values Centre coined the term Cultural Entropy to describe the “degree of dysfunction (friction and frustration) in an organisation of any human structure that is generated by self-serving, fear-based actions of the leaders” which impacts on levels of trust. And the 2017 Edelman Trust Barometer revealed, “The general population’s trust in all four key institutions — business, government, NGOs, and media — has declined broadly”. I believe that Cultural Entropy contributes to the reasons for Cognitive Dissonance among employees and manifests itself in the engagement and productivity crisis. It also helps in understanding why trust in institutions is at such low. More and more people see the businesses and institutions we distrust and disengage from as dysfunctional in the way Barrett describes.
Social Division
The Edelman Trust Barometer results also indicate the reasons for declining levels of Social Cohesion in society. A cohesive society is one that: works toward the wellbeing of all its members, fights exclusion and marginalisation, creates a sense of belonging, promotes trust and offers its members the opportunity of upward mobility (rising from a lower to a higher social class or status) according to the OECD.
While the notion of “social cohesion” is often used with different meanings, its constituent elements remain the same which include concerns about: Social inclusion – the process of improving the terms for individuals and groups to take part in society; Social capital - the resources resulting from people cooperating together toward common ends, and Social mobility - the ability of individuals or groups to move upward or downward in status based on wealth, occupation, education, or other social variables.
Austerity, a decade of stagnant incomes, rising job insecurity, growing inequality and falling social mobility are some of the causes of declining social cohesion and low levels of trust. They have fuelled the anger that has nourished growing levels of populism (right and left) and nationalism.
Conflicts Between Nations
Related to the rise of nationalism and populism, we are witnessing a tendency towards an increase in military conflict", trade wars and protectionism. The reversal of globalization and the weakening of international institutions is also apparent. And the post second world war idea of a “society of nations” now seems like a redundant idea.
The Link
At every level, from the individual to the relationships between nations, one word defines their current state. It is incongruence. Disunity, discord, disharmony, disagreement, disconnection, weakness, insecurity, fragility and instability are the synonyms. The opposite is congruence. Accordance, harmony, balance, unanimity, unity, unison, affinity, equality, consensus, relatedness, security and empathy are its synonyms.
People, business, organisations, institutions and governments need internal congruence to function well. They also need external congruence with those people and organisations they interact with including stakeholders in the case of business, and other nations, citizens and future generations in the case of governments.
Shared purpose, ideas and values between a person and groups of people – whether in businesses, organisations, institutions, society or nations - are the best way to achieve congruence. At the very least there needs to be respect and tolerance and, ideally, empathy. But when they are absent, problems are unlikely to be solved by conflict. A more sustainable approach would be to encourage greater shared consciousness, leading to congruence among all parties to reach a level of unity and affinity.
Incongruence is the cause of many of today's problems at each level and congruence is the way to overcome cognitive dissonance, cultural entropy, social division and conflicts between nations. Achieving it requires a higher level of consciousness than currently exists in many individuals and most organisations today. But change can come if leaders improve their own levels of consciousness first. Then they can raise consciousness levels among those they lead. Wise leaders will realise congruence is an essential means of achieving and sustaining their objectives. And only in this way can we ever expect to realise the levels of social cohesion that will lead to real and lasting increases in progress, prosperity and peace.
Value Schemes and Congruence
Congruence is both a concept and an objective. It informs the creation of what I call Value Schemes - the means by which businesses, organisations, institutions or governments, create value for stakeholders. They are created by design by executives who understand what value (financial and non-financial) means from the perspective of each stakeholder group. The schemes then inform the creation of strategies and plans designed to create value for each group in a fair and balanced way to maintain congruence over time. If this cannot be achieved the Value Scheme is not going to be sustainable and the business, organisation, institution or government will fail in time.
Valueism, Value Schemes and Congruence
Value Schemes describe the way business, organisations, institutions and governments can ensure they are focused on value creation for the benefit of all stakeholders. They are the way in which we will achieve the next evolution of capitalism, from the current model focused on value extraction. A problem that economist Marianna Muzzucato recognises in her forthcoming book saying, “In modern capitalism, value-extraction is rewarded more highly than value-creation: the productive process that drives a healthy economy and society”.
For almost half a century now, management theory and practice have been obsessed with the management of performance, efficiency and costs – the denominator in the value equation. Valueism does not ignore these factors, but it argues for a shift in emphasis to a focus on value creation – the numerator in the equation. But, importantly, it also calls on us to recognise that financial value and profits are merely the by-products of creating real value for all stakeholders. Profits should never be the focus. And real value comes in many forms, both tangible and intangible.
Today the many forms of real value are very poorly understood and most executives cannot readily articulate how they create, even in the narrowest terms. But, Valueism asks us to define what value we create and for whom. It asks us to articulate this in a Value Scheme which then represents a framework for understanding value creation fully and from all perspectives.
We Need Valueists
Today we rely on economics, “the science that deals with the production, distribution, and consumption of goods and services, or the material welfare of humankind”, to understand economies. But all that we value is not limited to goods, services and that which is material and financial.
In business, we have relied on finance and accounting to measure and manage the financial health of a business or organisation in the process of producing products and services, and the costs that go into their making and delivery. But financial value – that which can be measured in monetary terms – is a very narrow view of value creation. And when accounting for that which we rely upon to create value in the future we have a problem. Up to 80% of the future value creation potential of most businesses is now thought by some to reside in the “intangibles” (people, know-how, reputations, relationships, knowledge etc), that we struggle to account for accurately in financial terms. This makes financial accounts a poor indicator of the future value creation potential of a business as Professor Brauch Lev explained in The End of Accounting.
If businesses, economies and societies are to prosper they will need people who have a much deeper understanding of what we mean value and how it is created. These people, who will understand the principles and practices of Valueism, will be able to create and articulate Value Schemes. I call them Valueists. They will appreciate the strengths and weaknesses of other disciplines. They will also be driven by a desire to improve levels of congruence with the goal of contributing to social cohesion, driven by a great and noble service to society. In being Valueists, they will help reduce distrust, division and conflict by leading with a higher level of consciousness, and their ability to coach those they lead to higher levels.
The opportunity
According to the 2018 Edelman Trust Barometer global results, most of us believe business can, and should, deliver greater value in many ways. It found business is now expected to be an agent of change. Sixty-four percent believe a company can take actions that both increase profits and improve economic and social conditions in the community where it operates. The report adds, “Nearly two-thirds of respondents say they want CEOs to take the lead on policy change instead of waiting for government, which now ranks significantly below business in many markets. This show of faith comes with new expectations; building trust (69 percent) is now the No. 1 job for CEOs, surpassing producing high-quality products and services (68 percent)” in their research findings.
But, as I said in my recent article, Shared Value: A Bandage on a Cancer, Valueism goes beyond the narrow concept of Shared Value put forward by Professor Michael Porter, which is primarily still about economic value. We must understand the meaning of value in much broader terms if the opportunities highlighted by the Edelman Trust Barometer are to be realised.
The future value creation potential of a business will be built on reputation, relationships, trust, provision of social capital and contribution to social cohesion. Business can confront internal and external conflict, distrust and division and increasingly we expect it to do so. Meeting these expectations is the big opportunity and Valueism is a way in which the opportunity may be realised.
We are organising a half-day seminar on understanding Valueism and its implications for business and other organisations in London on the afternoon of June 5th. Details & Tickets You can also book a speaker on Valueism for your own event: [email protected]
The Valueist, a new quarterly Magazine will be launched soon.