Reconciling change with a need to respect historical company values

Although revising the historical values of a company is necessary in a dynamic modern world, it can disrupt people’s sense of ‘who we are’ and should be carefully managed

The history of a company can be very important to an organisation, especially if these historical values have become deep-rooted within the company and its employees. However, to keep up to date with present day issues and future plans, a company is sometimes required to change its mottos or values. Although revising the historical values of a company is necessary in a dynamic modern world, it can disrupt people’s sense of ‘who we are’ and should be carefully managed.

In Japan, historical values are often embodied in statements called ka-kun, which loosely translates to ‘family mottos’. Ka-kun include principles, rules and instructions left by past leaders, such as company founders, to their successors. In many Japanese firms, foundational ka-kun have remained relevant for decades, even centuries, passed down through history via oral or written memory to the present day. These ka-kun can be interpreted as strategic identity statements – statements expressing the mission, values, and philosophy of a company. Over time, these statements create a shared sense of purpose among employees and motivate them to work together to achieve common goals.

Reconciling change with historical values is a challenge for very old organisations since these values may have become ingrained in the company and are often emotionally charged. This is particularly difficult for family firms as managers may be reluctant to abandon family traditions, feeling an imperative to pass them on to the next generation, while somehow remaining flexible to change.

Longstanding, time-honoured identity statements may be more resistant to change compared with more recent statements, as any change or alteration may threaten the sense of continuity. Change that threatens identities closely associated with these statements, without offering alternatives which respect the company’s history, are likely to encounter a backlash from employees.

My research, conducted with co-authors Innan Sasaki from Lancaster University, Josip Kotlar from Politecnico di Milano, and Eero Vaara from Aalto University, investigated how long-established Japanese firms deal with needing to adapt their company mottos and philosophies to support strategic change. They need to ensure that any changes maintain a sense of continuity with values and guidelines laid out long before by ancestors, which are still revered and respected.

We used archival research, current documents, and interview data to investigate how 25 Japanese companies engaged with the revered part of their history in the face of strategic change: we looked into when, why, and how they had revised their historical mottos. Through the analysis of corporate mottos from these long-established firms, we identified three strategies that managers use to deal with the tension between promoting change and maintaining a company’s sense of continuity with past leaders’ values.

1.  Elaborating

An ‘elaborating’ strategy is based on the gradual revision of historical statements, selectively building on and extending parts that support current strategic developments. This helps to maintain a sense of continuity with historical statements by linking part of any new statement with the original one, presenting it as an update rather than a replacement. Managers refocus on historical values that are viewed as relevant in the present, while dropping references to parts of the historical statement that are no longer considered relevant. Successive rounds of elaboration over the years can even lead to aspects of the original statement disappearing entirely and being forgotten.

2. Recovering

‘Recovering’ involves creating entirely new statements that draw on founders’ writings and anecdotes to maintain continuity between historical values and current strategic developments. While these statements are new, they draw explicitly on historical references and documents from the company’s archives. Managers may search for written, oral, or material forms of memory to recover values relevant to the company’s present situation, often in the form of writings from past leaders. By disconnecting the old and new, companies can redirect attention to values and strategies required for modern issues while still claiming continuity with company history through the re-use of past texts and information which had been set aside, presenting any new statement as one that is firmly grounded in the founder’s values.

3. Decoupling

‘Decoupling’allows the co-existence of historical statements and new ones, enabling a firm to maintain continuity with historical values separately while showing concern for new issues that may not have existed at the time historical statements were written. This introduces new and separate statements appropriate for strategic change, targeting modern and emerging issues that could not be addressed based on historical statements, such as social and environmental responsibility. For example, a company increasing in size or public awareness can lead to a greater expectation to behave in a socially and environmentally responsible way. These concerns were not important in the distant past so were not considered in historical values and statements.

These three strategies help managers confront tensions rising from the need to adapt and change while at the same time respecting historical values and guidelines, through different forms of selective remembering and forgetting. ‘Elaborating’ selectively breaks down norms and values from the historical statement which remain relevant to modern day, while allowing the irrelevant parts to be forgotten. ‘Recovering’, however, involves selectively remembering historical texts and ideas that support strategic change, while replacing the original statement.

When these ancient mottos were created, all the firms studied were family owned and many of them still were at the time of our research. Founding values are a distinctive element of family firms that drive their long-term success, with traditions used to encourage innovation and entrepreneurship. However, strong attachment to past values can also cause inactivity and inhibit the ability of family firms to change and adapt. Our study shows how family firm managers can take advantage of the inspirational legacy of foundational values, while still adapting to change as it arises.

Our research also offers an insight into the history of one of the earliest methods used by managers to express the fundamental principles of their business: strategic identity statements. These statements are integral to both organisational identity and business strategies, directing attention to strategic issues, setting direction for change, and helping a company stay on course with targets. The strategies detailed show alternative options available to managers to maintain a sense of continuity with a revered and respected past, while still ensuring invaluable adaptation to a changing environment.

Davide Ravasi is Professor of Strategy and Entrepreneurship at the UCL School of Management, University College London.