CHIEF VALUE OFFICER – THE IMPORTANT EVOLUTION OF THE CFO | 1. WHAT DO WE MEAN BY ‘VALUE’
1.7 Linking value to values (and strategy) A further consideration is the link between the concept of value and the values of an organisation. Organisational values are a set of core beliefs held by an organisation. They act as guiding principles that provide the organisation with purpose and direction and set the tone for its interactions with its customers, employees and other stakeholders.
It is important to see these two concepts as complementary rather than mutually exclusive. They may represent a short- term (perhaps annual) focus on profit maximisation against a longer-term perspective suggested by the concept of value. It is possible to reconcile these two perspectives. The work of organisations such as the Impact Economy Foundation (Impact Economy Foundation n.d.) illustrates one way of doing this. A CFO whose organisation is private-equity-backed commented that organisations need to: ‘continue to perform and grow, and to do so in a more productive and effective way, either using technology or automation. AI, for example, is creating huge amounts of value for us as a business, [and] also for our clients and our stakeholders’. A European CFO commented, ‘value is directed to a different actor into the system. In Europe people are looking at profit, but it is much more important to demonstrate a level of ethics towards sustainability. It is another pressure on the CFO who only looks at profits’. A CFO from Africa discussed a perspective for assessing value against profit in terms of performance, commenting that ‘[the] usual direction [CFOs] are coming from has been measuring the value of a company either by the performance of the shares or your bottom line. In doing that everything is monetised. But now the longer-term [perspective] looks at the social impact, it goes to look at the environmental aspects, and when you are looking at those things an annual cycle may not be adequate’. This participant then questioned whether finance teams were ready for the task and concluded that perhaps they were not. The changing role of the finance team is discussed in section 2.6.
Figure 1.7 illustrates the potential linkage and the role of the strategy of the organisation. As has been explained, the value that an organisation delivers to its recipients is through a range of channels and is executed by using a range of capitals as the enablers. The strategy of the organisation reflects the direction in which it seeks to progress. Any discussion of strategy will have a range of outcomes which should embrace some, if not all, of the recipients of value who were outlined in section 1.5. To execute that strategy, the organisation needs to establish a common purpose that can be exemplified through its values. There is, therefore, a strong correlation between the concepts of ‘value’ and ‘values’. A CFO commented that, ‘I think there is a balance to be struck [between] short term, the medium term [and the] longer term. The sustainability aspect comes into that conversation as well, because I think that as organisations start looking at a more balanced scorecard, integrated reporting approach [to] how they actually perform… they are also considering how they report on value creation’. This participant continued, ‘the long-term does not compromise your short-term performance and everything that you are doing there. It is about having that sustainable plan’. Whether the CVO role exists today is a question – or is it an opportunity?
FIGURE 1.7: Value and values
Strategy
Value
Values
THE STRATEGY OF THE ORGANISATION REFLECTS THE DIRECTION IN WHICH IT SEEKS TO PROGRESS... TO EXECUTE THAT STRATEGY, THE ORGANISATION NEEDS TO ESTABLISH A COMMON PURPOSE THAT CAN BE EXEMPLIFIED THROUGH ITS VALUES. THERE IS, THEREFORE, A STRONG CORRELATION BETWEEN THE CONCEPTS OF ‘VALUE’ AND ‘VALUES’.
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