From the pinnacles of power by Fortune editor at large Patricia Sellers
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March 5, 2009, 3:02 pm

Most Admired Companies know their values

by Jessica Shambora

For Fortune’s Most Admired Companies issue, released this week, I interviewed the CEOs of two top performers: Bill Weldon at Johnson & Johnson (No. 5 on the list) and Jim Skinner at McDonald’s (No. 16). Fortune ranks companies based on survey results from more than 4,000 executives, directors and securities analysts.

My interviews with these chiefs covered a range of topics, from cosmetic surgery to the Dollar Menu. But these bosses were like-minded about one thing needed to rise above a crisis: a guide to corporate values—written and handy to all employees.

It seems Pollyannaish, but management guru Jim Collins notes that values are key, particularly now. “The more challenged you are, the more you have to have your values,” he told Fortune in a recent Q&A. General Electric (GE), Procter & Gamble (PG), IBM (IBM) and Johnson & Johnson (JNJ) all grew up with “underlying ideals or principles that explained why it was important that they existed,” Collins says. “What really matters is that you actually have core values – not what they are.”

Easy-to-understand principles are particularly critical for global, decentralized companies like McDonald’s (MCD) and J&J. Clearly written rules clarify the mission to employees in outposts around the world.

“Our Credo,” laid out by Robert Wood Johnson in 1943, still governs J&J, says CEO Weldon. “Our Credo really sets our priorities. And our first priority is to the people who use our products–to make sure we’re supplying them with quality products,” he says.

J&J applicants must read the credo before being hired, and Weldon says that anyone transitioning into a leadership position in the company spends two days with himself, the J&J’s HR boss and general counsel, talking about how the credo “has shaped our organization and decisions” over 66 years.

McDonald’s “Plan to Win” doesn’t have that kind of longevity, but CEO Skinner says that credo has driven his company’s resurgence. “We came off a pretty tough year in ‘02, and then we created a revitalization plan led by the Plan to Win,” he says. Success has come from franchisees who tailor the Plan to Win for their particular restaurants.

The Five P’s–people, products, place, price and promotion–provide strategic direction for McDonald’s employees on the front lines. “We will provide a superior customer experience by properly staffing out restaurants with a team of highly engaged, well-trained and diverse people,” the Plan reads.

“It’s not a profound document,” Skinner says. “It’s really about being our customers’ favorite place and way to eat and drink.”

Clear and simple. The Plan to Win is posted in the management corridor at McDonald’s headquarters in Oak Brook, Ill.. And it’s always reflected in the goals that teams from Canada and Europe bring to Skinner. “It almost gets boring,” he quips.

In business, boring isn’t always bad, especially when it is something with staying power. As you consider your values in these most challenging times, remember what Warren Buffett (BRKA) has said: “If principles can become dated, they’re not principles.”

I just read in my local paper (the Memphis Commercial Appeal), where International Paper has been named the most admired business in the forest & paper products industry. Well, that industry must be made up of some very poorly run businesses for IP to be the most admired. The leadership of IP is absolutely clueless, void of conscience, consumed with greed, concerned only with covering their way over compensated asses, and blind to the pain and suffering that they have created within this once proud and financially mighty company. Can John Faraci somehow justify his $13,000,000 per year salary, and his $85,000 per year housing allowance, and the golden parachutes for him and his hand picked cronies?? How about the board meetings at plush resorts costing in excess of $1000 per night? How about the private jets scurrying across the country, empty or with just a single passenger. How about flying a board member to Atlanta, just so she could get her hair done? How about the retreats where over $65,000 was spent on the wives and significant others so they could attend a spa for one day? These few examples, do not show me a Fortune 100 Company that deserves any type of an award of excellence. Faraci and his minions need to go, and they need to go NOW!!

Posted By Bill Holt Memphis, TN : March 12, 2009 11:16 am
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Jessica ShamboraJessica Shambora started with Fortune as a reporter in June of 2008, following a stint as assistant editor at Travel+Leisure Golf. Shambora has written for Sports Illustrated, SI Latino, Women's Health, and Triathlete. She is a frequent contributor to Postcards.
Every year Fortune and the U.S. State Department sponsor the Global Women Leaders Mentoring Partnership, which brings rising-star women from developing countries to the U.S. to work closely with participants of the annual Fortune Most Powerful Women Summit - among them CEOs Andrea Jung of Avon, Ann Moore of Time Inc., and Ursula Burns of Xerox.
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