Values-Based Leadership:

Leading from the Inside Out

By Richard Barrett

Becoming a successful leader—someone who is able to build a long-lasting, high-

performing team, organisation or community—is not about what you do, although that
is important, it is about how you do what you do—it is about living your deeply held
values.

Sustainable advantage and enduring success—both for companies and people who work
for them—now lie in the realm of how, the new frontier of conduct. 1

What my research 2 and the research of others shows is that values-driven teams,
organisations and communities are the most successful on the planet. 3 Values-driven
organisations generate higher earnings; they are more customer-focused and more
productive, and they have higher levels of employee engagement, higher retention rates
and lower absenteeism. Because employees feel cared for, they willingly bring their
creativity and discretionary energy 4 to their work.

Values-driven organisations also generate more customer loyalty and more societal
goodwill. The reason they do this is because they strive to meet the needs of all their
stakeholders. 5 This in turn generates high levels of trust. Trust is the glue that bonds

1
Dov Seidman, How: Why How We Do Anything Means Everything (New York: John Wiley &
Sons), 2011.
2
Richard Barrett, The Values-Driven Organisation: Unleashing Human Potential for Performance
and Profit, Richard Barrett, (Fulfilling Books: 2013)
3
Raj Sisodia, David Wolfe, and jagdish Sheth, Firms of Endearment: How World-Class
Companies Profit from Passion and Purpose (Upper Saddle River, NJ: Wharton School
Publishing), 2007.
4
Discretionary energy is the energy that employees choose to devote to their work over and
above the normal amount of energy that is required for them to fulfil their duties or work
contract.
5
John Mackey and Raj Sisodia, Conscious Capitalism (Boston: Harvard Business Review), 2013.

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people together and the lubricant that allows energy and passion to flow. Trust builds
internal cohesion.

Stephen Covey states:

Trust always affects outcomes—speed and cost. When trust goes up, speed will also go
up, and costs will go down. When trust goes down, speed will also go down, and costs
go up. 6

Trust is an end value; in order to trust and be trusted other values have to be in place.
Figure 1 shows the components of trust.

Figure 1: The Trust Matrix

On the left-hand side of Figure 1 are the values you need to live by to engender trust:
On the right-hand side of are the competencies that have to be acquired to engender
trust.

Character is a reflection of how you are on the inside, your intent and the level of
integrity you display in your relationship to others. These depend primarily on the level
of development of your emotional intelligence and social intelligence. Intent is
demonstrated by caring, transparency and openness; integrity is demonstrated by
honesty, fairness and authenticity. Whilst all these values are important, authenticity is
perhaps the most important value for building trust.

6
Stephen Covey, The Speed of Trust: The One Thing That Changes Everything (New York: Free
Press), 2006, p. 13.

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The authentic leader pursues purpose with passion, practices solid values, leads with
heart, establishes enduring relationships and demonstrates self-discipline. The authentic
leader brings people together around a shared purpose and empowers them to step up
and lead authentically in order to create value for all stakeholders. 7

Competence is a reflection of how you are on the outside, your capabilities and the
results you achieve in your role. These depend primarily on the level of development of
your mental intelligence, your education and what you have learned during your
professional career. Capability is demonstrated by skills, knowledge and experience.
Results are demonstrated by reputation, credibility and performance.

Even though the focus on competence (capability and results) is important, these are
skills that can be learned and accumulate over time. I believe the focus on character
(intent and integrity) is more important because these qualities are required for creating
internal cohesion and are much more difficult to develop. Competence is about
achieving results; character is about how you achieve them.

How do you create a high-performance culture?

Everyone agrees that the culture of an organisation determines its success. Who you are
and what you stand for have become just as important as the quality of the products
and services you sell: But where does culture come from? Simply put, the culture of an
organisation is a reflection of the values and beliefs of the leaders. Who you are as a
leader, determines the corporate culture. Therefore, if you want to change the culture,
either you must change or you must change the leader. Cultural transformation begins
with the personal transformation of the leaders: Organisations don’t transform, people
do. The first step in creating a high-performance culture is to measure the culture you
have created. Most cultures are created unconsciously. When you are able to measure
your culture, you can consciously create the culture you want.

How do you measure culture?

It used to be that culture was considered an intangible, and therefore not susceptible to
measurement. This is no longer true. You can now measure your culture by using the
Barrett Values Centre’s Cultural Transformation Tools (CTT). 8 The CTT are based on the
Seven Levels of Consciousness model. The model, along with the Cultural
Transformation Tools, is fully described in my previous books (Liberating the Corporate
Soul (1998), Building a Values-driven Organisation (2006), and more recently The
Values-driven Organisation (2012)). As of January 2014, more than 6,000 organisations

7
Bill George, True North: Discover Your Authentic Leadership (San Francisco: Jossey-Bass), 2007.
8
For more information on the use of the Cultural Transformation Tools go to
www.valuescentre.com.

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 in 60 countries have used the CTT to support their journey to high performance. The
Seven Levels of Organisational Consciousness are described in Table 1.

Table 1: The Seven Levels of Organisational Consciousness.

Levels of Actions and needs Developmental task

consciousness

7 Service Creating a long-term Serving: Safeguarding the well-being of the

sustainable future for the planet and society for future generations.
organization by caring for
humanity and preserving the
Earth’s life support systems.
6 Making a Building the resilience of the Collaborating: Aligning with other like-
difference organization by cooperating minded organizations and communities
with other organizations and for mutual benefit and support.
the local communities in
which the organization
operates.
5 Internal Enhancing the capacity of the Bonding: Creating an internally cohesive,
cohesion organization for collective high-trust culture that enables the
action by aligning employee organization to fulfil its purpose.
motivations around a shared
set of values and an inspiring
vision.
4 Transformat Increasing innovation by giving Empowering: Empowering employees to
ion employees a voice in decision participate in decision making by giving
making and making them them freedom and autonomy.
accountable for their futures
and the overall success of the
organization.
3 Self-esteem Establishing structures, Performing: Building high-performance
policies, procedures and systems and processes that focus on the
processes that create order, efficient running of the organization.
support the performance of the
organization and enhance
employee pride.
2 Relationship Resolving conflicts and Harmonizing: Creating a sense of
building harmonious belonging and mutual respect among
relationships that create a employees and caring for customers.
sense of loyalty among
employees and strong
connection to customers.
1 Survival Creating financial stability, Surviving: Becoming financially viable and
profitability and caring for the independent.
health and safety of all
employees.

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Case Study

The following Table and Figures show what happened when a 27,000 person company
in South Africa consistently used the CTT to measure their culture from 2005 to 2011.
Each year, based on the results of the values assessment, the leaders made changes that
aligned with the type of culture that employees wanted. Table 2 shows the key
performance indicators during this period (income, number of staff, revenue per capita
and cultural entropy).

Table 2: Cultural evolution key performance indicators

Year Income (ZAR Number of Revenue/ Cultural

millions) staff capita (ZAR entropy
thousands)

2005 15,809 22,188 713 25%

2006 18,948 24,034 788 19%
2007 22,428 26,522 846 17%
2008 22,077 27,570 801 14%
2009 21,570 27,037 798 13%
2010 23,635 27,525 859 13%
2011 28,115 28,494 987 12%

Since this company started mapping their values in 2005, the level of cultural entropy
decreased from 25 per cent to 12 per cent. 9 At the same time, revenue per capita
increased from 713,000 ZAR to 987,000 ZAR—a 38 per cent increase.

You will also notice that during the global economic meltdown in 2009–10 the level of
income only showed a slight dip (other companies in the same sector in South Africa
suffered a more significant reduction in income). The productivity of staff also dipped,
but quickly rebounded by 2010, and has since grown significantly.

Figure 2 shows the changes in revenue per capita (productivity) and Figure 3 shows the
level of cultural entropy: As the level of cultural entropy decreased the productivity of
employees increased. The level of employee engagement also increased.

9
Cultural entropy represents the degree of dysfunction in an organisation. It is a key cultural
performance indicator. A level of 10 percent or below is considered to be prime. Cultural
entropy is inversely correlated with employee engagement: Low entropy leads to high
engagement, and high entropy leads to low engagement.

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 Figure 2: Level of cultural entropy

Figure 3: Employee productivity (revenue per capita)

Conclusion

The culture of an organisation is a reflection of the values and beliefs of the leaders. As
the leader’s values change, the culture changes. If you want to change your culture, you
must begin by measuring employee’s perception of the current culture and their desired
culture. This allows the leadership group to find out what is working and what is not
working and take actions to introduce changes that align with employees desired
cultural values. As you do this, year by year you will find the level of values alignment
increasing, the level of cultural entropy decreasing, and the level of employee
engagement increasing.

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