Kumar Mangalam Birla
The Economic Times
8 Jan 2007

Many years ago, after the death of the Pope, when he was being taken to heaven, his new home, he was joined by a businessman. As both of them got talking with one another, the Archangel came with a set of keys to take the Pope and the businessman to their new abodes. The businessman was totally aghast to find that the Pope was being taken to a multi-storied apartment, while he himself was being escorted to a fine looking sprawling bungalow. Naturally he thought that there was some mistake. So he said to the Archangel that he was only a businessman and that the other person was the Pope. To which the Archangel quipped, "Oh, I know that for sure. But you see, we already have 200 Popes here and you are the first businessman to be welcomed in heaven".

Humour aside, why are we focusing so much on the primacy of values in business? I believe, the days are long past when the business of business was just business. The idea that a corporation is merely a legal abstraction, devoid of heart and soul, no longer has legitimacy. The corporation may be an economic wunderkind — but it falls short and often falls apart if it does not meet the needs of society, or if it does not act with a conscience. Today, no stakeholder — be it shareholders, employees, community or government — would accept a business whose rationale is limited to profits at any cost — or only to compulsions of its immediate business. It has by now been categorically demonstrated in research after research that investors are willing to pay a substantial premium for good governance because, over time, good governance flows through to superior performance and higher valuations.

So let me zero in on this accent on values. Maximising value, of course, has to be a prime objective for any corporation. But it is value — plus 's' added on, i.e., values — that will ensure the sustainability and survival of an organisation. In this case the addition of a single letter makes all the difference — value and values! So superior values leads to superior value for stakeholders.

The values of an organisation define its character and personality. They guide, shape and influence behaviour and actions. The external world perceives and responds to an organisation based on the way it goes about conducting its business. The world of business even today is going through a crisis of trust, where the credibility of business leaders and the very legitimacy of business organisations are being questioned. The scrutiny from government, media, analysts, investors and action groups is becoming more stringent everyday. In such an environment of scepticism and cynicism our actions alone can inspire confidence. What people and society are searching for is the soul of the corporation, its values.

Let me also talk about how values enhance the effectiveness of organisations. I believe that the articulation of a common set of values enables organisations to pull in a common direction, gives employees something they can easily identify with, helps them to find common cause with each other and creates a common sense of purpose. It also makes the assimilation of new employees and cultures easier and faster in periods of rapid growth. It gives everyone in the organisation a sense of clarity so that, when put on the spot, they can act with a high degree of confidence. There's no doubt that people contribute more when they can relate to an organisation, when they can understand the organisation — and when the values of the individual and the organisation are in harmony. Let me reinforce the idea of values, by citing examples — at the level of the individual and at the organisational level.

At the individual level, take for instance the example of successful athletes, who were hailed as heroes for their outstanding performance, only to be later on found to be guilty of substance abuse. At the business level, take the example of the housing sector in India. Until even a decade ago, it was like the 'Wild West' — unscrupulous builders, poor construction quality, unofficial payments and flimsy or non-existent consumer rights and questionable lending practices. These unethical practices stunted the housing sector, despite the huge potential demand. HDFC introduced order, transparency and ethical practices into the housing industry to a considerable extent.

I would also like to underline that values vary across cultures and environments. Societal culture has a strong bearing on value systems. For example, the sanctity of contracts differs across countries. In some countries the idea of merit includes a high component of loyalty; in some others, loyalty doesn't count for much. In some countries doing business with relations and friends is not acceptable; in other places, personal associations count for a lot. Oriental values are in many respects different from those of the West. Anglo-Saxon values differ markedly from the European.

But I believe that great and lasting businesses are never built on the quick sands of opportunism. If living by our values means, perhaps growing at a pace slower than we would otherwise have liked, so be it. The key to enduring leadership lies in knowing what we stand for and in living by that. In essence our values provide us with a moral compass, they provide us with our roots and they provide us our wings.