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In its famous study, "The War for Talent," consulting giant McKinsey & Company asked 200 executives from a number of companies why they joined, stayed with or left an organization. McKinsey found that 58 percent of its respondents cited values and culture as being absolutely essential. While McKinsey used its study to build a case for finding superior talent as a prime source of competitive advantage, Charles A. O'Reilly III and Jeffrey Pfeffer see things a bit differently. Certainly, companies that want to succeed need great people - making recruitment and retention important. But even more important, and often more difficult to obtain, is the establishment of cultures and systems in which these great people can actually use their talents, as well as management practices that make it possible for ordinary people to perform as if they were in the top 10 percent of their field.

Management Practices
There are six management practices that are essential to finding and leveraging the hidden value in an organization. Truly peoplecentered companies:

• Place values and culture first.
• Make those values real through alignment and consistency.
• Hire for fit.
• Invest in people.
• Share information.
• Reward and recognize adherence to values.

Place Values and Culture First
The most visible characteristics that differentiate extraordinary companies from ordinary ones are their values - and the fact that those values come first, even before stock price. Most organizations purport to have values, usually expressed in a mission or vision statement and handed out on 3-by-5-inch laminated cards, to be taken everywhere. However, these are often mere slogans, offering no real advantage and inviting cynicism from a skeptical work force. True company values are typically defined as a set of beliefs about what is worthwhile to a corporation: the principles or standards that it feels are important and that define, in essence, what employees should pay attention to. For a person to succeed in an organization, they discover what's important to that firm by: looking carefully at the activities or behaviors that are rewarded; observing how people get ahead and who gets promoted; and watching and listening to what senior managers do and how they spend their time.

True Values Revealed
Unfortunately, employees often find discrepancies in what senior managers say and what they do, revealing the true underlying values of a company (usually things like, "follow orders," "please your boss," "don't take risks" and "results count; people don't"). These things can only be hidden for so long, if indeed they are hidden at all; regardless of what the mission statement or senior management says, employees will eventually come to understand what the company's real values are.
As a result, employees behave in accordance with these values:

• Employees are not likely to exert much effort beyond for what they are explicitly rewarded; the "show me the money" mood prevails.
• Employees are constantly on the lockout for new and better job opportunities in other organizations; loyalty is for fools.
• Unless cooperation is explicitly monitored and rewarded, teamwork is viewed as optional.

The cycle is never-ending. In order to resolve problems brought on by employee behavior (performed in reaction to the "true" corporate culture), management creates and employs ever more sophisticated control and incentive systems to ensure that necessary teamwork occurs and that loss of intellectual capital (as a result of employee defections) is minimized.

The Humanistic Value System of AES
Contrast the norm described above with the way in which values and the cultures they imply are handled at AES Corporation, a power generation company operating more than 110 plants in 19 countries. With 10,000 people in its employ, all speaking different languages and without common history or tradition, AES has been extraordinarily successful at implementing a humanistic value system and a management scheme based on trust.

It is the company's value system that has made it successful. In its 1998 annual report, AES defined its four core corporate values: integrity, fairness, social responsibility and fun. It is the last value - fun - that has gotten the greatest amount of attention. AES management defines fun as "establishing an environment in which people can use their gifts and skills to make a difference in society without fear of being squelched."

AES backs its words with a commitment to its employees; people are given interesting things to do, decisions to make, challenges to meet and many opportunities to learn and try different things. AES readily trades the gains from specialization - having people do the same repetitive tasks, ad infiniturn - for the interest and enthusiasm generated when people get to take on new, challenging assignments. AES' four corporate values are so strongly held that some outside the walls of the corporation see them as a liability. The Securities and Exchange Commission requires the company to list its adherence to values as a possible risk factor when it offers stock to the public. The following statement must accompany each public offering:

"An important element of AES is its commitment to four major ‚shared' values. ... [If] the Company perceives a conflict between these values and profits, the Company will try to adhere to its values - even though doing so might result in diminished profits or forgone opportunities. Moreover, the Company seeks to adhere to these values not as a means to achieve economic success, but because adherence is a worthwhile goal in and of itself."

Most employees and managers at AES find it amusing, if not incredible, that adherence to company values would be listed as a risk factor. They wear that "risk" as a badge of honor.

Make Values Real
A strong set of corporate values is crucial to the success of extraordinary organizations. In and of themselves, however, they are virtually worthless; to make values real, the following must happen:

• Senior management must believe in those values and act consistently in accordance with them. If management says one thing and does another, employees will become quickly skeptical and reluctant to act upon those corporate values - regardless of how attractive they might seem.
• There must be consistency between the organization's values and the practices that express these values. While the extraordinary organizations referenced throughout this summary are all quite different, each relies on the same six essential practices to reinforce its values. When aligned with each other and properly used, these six practices communicate the importance of values and are consistent with each other. When misaligned, they undermine those values, as well as the credibility of the people espousing the values.

Social Control Systems
Values also feed into powerful social control systems, acting as the basis for shared expectations about appropriate attitudes and behaviors. A people-centered company demonstrates a clear and consistent alignment of its values, the norms that express those values (the culture of the company) and the specific attitudes and behaviors that create the company's core capabilities. At AES, for example, the core value of "fun" helps establish an environment in which employees can use their gifts and skills to make a difference without the fear of being put down or reprimanded. Truly people-centered firms have strong cultures that provide explicit norms; people understand exactly what attitudes and behaviors are expected, as well as what attitudes and behaviors will not be tolerated.

Hire for Fit
Once a company's values and culture are clear, it then designs processes that help it identify the people who will best fit into the organization, and to screen out those who do not share their values. This often means vetting candidates with a list of needs that is balanced between skills and chemistry. These companies recognize that employees must feel comfortable in an organization in order to contribute to the achievement of its long-term goals. Thus, organizations are likely to seek candidates who are willing to learn and try new things, who are versed in teamwork, who are willing to accept responsibility - abilities that help people grow, change and develop in order to meet new business challenges.

Make Expectations Clear
To hire for cultural fit, companies must begin with an explicit set of values, then screen people against those values. They must take sufficient time to show candidates exactly what would be expected of them and give them opportunity to bow out if they do not feel it is a good fit with their needs and ambitions. The best people-centered organizations also allow employees to drive the recruiting process, since it is they who know the job best and can accurately convey to candidates exactly what expectations are required to succeed. New United Motor Manufacturing, Inc. (or NUMMI) is one of the most efficient automotive assemblers in the United States, a designation it holds as a result not of technological advancements, but of solid corporate values and culture, and a commitment to unleashing the power of the work force. The company is able to hire great workers in part because it is able to successfully weed out those who would not fit into that culture. Before being hired, each hourly applicant goes through a three-day assessment that includes production simulations, individual and group discussions and written tests and interviews. Evaluations (conducted by team leaders) concentrate on the applicant's ability to follow instructions quickly and safely, and to act in a team environment. o

Invest in People
Having performed the appropriate screening for employees who fit the culture and - values of the organization, people-centered companies then signal clearly to their employees the importance that is placed on each and every one of them.
NUMMI, for example, has a no-layoff policy, one initiated by Toyota (which runs NUMMI as a joint venture with General Motors), as a first step in establishing a culture of fairness, trust and mutual respect. The policy stipulates that no one will be laid off unless the long-term viability of the company is threatened. The company will drop outside contract work and give its top 65 executives pay cuts before even one line worker is laid off. Rather than laying people off during slow periods, the company will lower line speed and retrain workers in the basics of production, teamwork, problem solving and statistical quality control techniques. This train-rather-than-lay-off strategy is appreciated by NUMMI workers; one survey showed that more than 80 percent of NUMMI employees feel that job security is the most important aspect working at the company.

Companies also demonstrate the value they place on employees by making continued investments in employee development and career growth. Take these examples:

• New orientation at Southwest Airlines begins with a celebration to welcome new employees as members of the team. The company hires people not for a single job, but with a sequence of jobs in mind, investing in continued development through 80 hours of mandatory training each employee must have annually.
• New associates at The Men's Wearhouse are treated to a trip to northern California for skills training and socialization.
• New employees at Cisco barely have time to sit down, as they are immediately given training in the Cisco way, followed by continued offers to update their skills.

As we see above, the investment companies make in training does not have to be in skills training; often, people-centered companies orient the training explicitly toward socialization to their culture. By doing so, they convey the message to all levels of employees that each one of them matters, not just as a number, but as a person - and that the company is committed to them over the long haul.

Share Information
In many companies, operational and financial data are not shared with employees - this is viewed as somehow risking the security of the firm or compromising important competitive information. People-centered companies, on the other hand, see this information as vital to the work of their employees. They assume that if employees' intellectual capital is really to be used, they must understand in detail how the firm is doing and what it is trying to do. This open attitude leads to extensive sharing of information across all levels of an organization.

Open Books at Southwest and PSS
At Southwest Airlines, for example, all employees have access to critical information, including figures on turnaround times, on-time performance, lost bags and other customer service concerns. It is easy to see that Southwest's management considers its people to be trustworthy and smart - people with the ability and desire to use company information to the benefit of their customers and organization. PSS World Medical is another example of how open books can mean more efficient business. The $2 billion medical supply distributor has maintained an "open-book" policy since a financial crisis in the company's early days led it to sell stock to employees. Since the employees own the company, its books are open and all manner of information is shared with them. Patrick Kelly, CEO at PSS, knows that to get people to act like CEOs and rise to the occasion, they must see and understand all company-specific information. They can then see where they fit in and how their efforts contribute to the greater whole. This knowledge empowers employees - an empowerment that manifests itself in interesting and creative ways (see box below).

A Question of Trust
Regardless of whether they intend to do so, most companies with need-to-know information policies send a negative message to their employees that they aren't smart enough or reliable enough to be trusted with that information. Whether they fear disclosure or simply have a general distrust of their employees, companies with these kinds of policies hinder employees from contributing to the full extent of their capabilities. Contrast this with truly people-centered companies, whose open-book policies arm their people with the information they need to make real, sustained contributions over the long term.

Adherence to Values
People-centered organizations must carefully align their reward systems to their values. This doesn't always mean emphasizing money to motivate employees. In fact, money is often a minimal factor in the reward systems of these companies; recognizing that money is a powerful driver of behavior, they are careful in how they use it in their incentive systems. Instead of focusing on money, great people-centered companies emphasize the intrinsic rewards of fun, challenge, teamwork and growth. They provide opportunities for employees to feel good about their accomplishments, and find interesting and motivating ways to express the company's appreciation for employee accomplishments and efforts.