Why Jim Collins Is Wrong About How to Create Core Values

Opinions expressed by Entrepreneur contributors are their own.

Jim Collins is the guru of gurus on how to create great companies. He literally wrote the best-selling books on it — including Good to Great and Built to Last. He studied companies for years to share his observations.

While I don’t disagree with Collins on much, I strongly disagree with him on how to create company core values. If you follow his process to create your values, you will be selling your company short of its potential.

Core values are the deeply ingrained principles that guide all of a company’s actions; they serve as its cultural cornerstones.

Collins’s process is overly focused on personal values and could result in developing values that are largely disconnected from the company’s customer value proposition. That misalignment could hinder the growth and support of the business — and highlights the potential benefit of adopting a more effective process.

Visit the ‘Red Planet’ (but don’t stay)

The core exercise in Collins’s process is the “Mission to Mars.” In this exercise, the leadership team selects a group of five to seven people who do a “super job” of articulating the company’s core values because they embody those values. The group answers a series of six questions. The first three questions revolve around their strongest personal values, while the last three focus on values that should never change under any circumstances. The result is the values those people share in common.

What’s missing here? All consideration for the company itself! The exercise totally disregards what the business is about — its industry, its purpose and mission, its brand and what value it is known for delivering to the customer, its customer base and its competitive advantage — you get where I’m headed.

One question in his process specifies that you should disregard the industry you are in (it shouldn’t matter). Another asks if you would hold the value even if it became a competitive disadvantage (Spoiler alert: The answer he wants is yes), while the third asks if the value would be valid 100 years from now. What company lasts for 100 years? And what young company disregards its customers, thinking that will help them last for 100 years? Collins calls these enduring values, and I can see why.

The average age of a business in America is 10 years. You might be challenged to make it that long — much less 100 years — if you choose enduring values that have nothing to do with your business.

Collins came up with The Hedgehog Concept, which is the confluence of what a company is deeply passionate about, what they can be the best in the world at, and what drives their economic engine. The best companies have a strong Hedgehog. With a strong enough Hedgehog, company values may not matter. But for the other 30 million businesses in America, it would be smart to tilt the scale in your favor by approaching core values development in a more comprehensive way.

Try this instead

While the Mars Mission exercise can contribute to ideas for company core values, I think you need to replace the last three questions with questions more specific to your organization. The exercise should consider the business you are in, the industry, your brand and competitive advantage.

This works best if you start by defining several foundational tenets for the business, then use those to work from in addition to the Mars Mission results that identify core values shared by exemplary individuals. These tenets include the company’s core purpose or focus, mission, vivid vision, vision statement, the “big hairy audacious goal” and, especially, the brand promise.

Examining these company tenets, ask:

What key non-negotiable factors are crucial to the success of these elements?
What guiding principles are core to how we must operate to align with these?
What behaviors do we need to exhibit consistently to make it happen?
What top three priorities, essential actions or qualities must we uphold continuously to deliver on our promises for our customers and team?

Now, drawing from this much larger brainstorm of ideas, develop your company’s core values.

While the end result could include two or three values around the shared attributes of the existing team or how they work together that are key to preserving company culture, two or three values should guide how the company delivers for customers or the direction the company is committed to pursuing.

While Collins is focused on companies built to last 100 years, like Merck and Disney, I am focused on looking 10 years ahead as a time frame for your values. (Coincidently, that is the recommended timeline to achieve a “big hairy audacious goal,” another great Jim Collins invention). If in 10 years your values could be enhanced to align better with the evolving needs of the company, its employees and customers, don’t hesitate to tweak them. Core values don’t have to be forever.

I recently wrote an article about four entrepreneurs who sold their businesses for $50-$150 million within 12 years of founding. Each shared their core values with me — and for all four, at least half of their core values directly related to their approach to delivering value to the customer, either by process or product. It’s clear that their achievements in 12 years (or less) were significantly influenced by core values.

One benefit of producing values in this way is they are more tangible and yield visible results. That makes it easier to identify related behaviors and performance, enabling you to create effective recognition and motivational tools that amplify employee and company performance.

While I know of no book or Bible on how to write company core values, artificial intelligence is in the news a lot. I asked ChatGPT how to write core values, and the response was much closer to what I’m advocating than what Collins articulated.

Exceptional core values have the potential to propel a company to new heights in a short amount of time. They can be so powerful. Invest the time to formulate them correctly, hire employees who are a great fit with them and watch their transformative impact.

https://www.entrepreneur.com/leadership/why-jim-collins-is-wrong-about-how-to-create-core-values/465390