As a business owner, it’s very easy to get caught up in the day-to-day struggles of running your company. With so many pressing problems, so many different situations vying for your attention, you don’t exactly have an abundance of time left over for examining the big picture.
Take values, for instance. While we all understand what a value is, fewer of us really take the time to examine what our values are, particularly those that relate to our business.
You may have a pretty good idea of what your core value/care about as a business owner. If you’ve been in business for any length of time, you’ve probably faced some situation in the past where you were required to make a decision between different options.
But how did you decide what choice to make in that situation? The answer is…
You made a business judgment based on your values
- Maybe doing things the right way was more important to you than getting rich quick, so chose not to defraud your customers.
- Maybe you cared about your employees more than you were legally required to, and made allowances for them when they were stricken with illness.
- Maybe you valued substance more than style, so you chose to plow your budget into product design instead of marketing it aggressively.
The specifics don’t matter – all that matters is that in any situation, you’re going to take what you deem to be the correct course of action. Your perception of what’s right and what’s wrong in these circumstances is dependent on your core values. If you don’t consciously choose what core values you adopt as a business owner, you’re automatically relinquishing control of the situation, handing the reins over to someone else.
In some cases, you might get away with this. It’s possible that the competitors you’re modeling your business off of really do know what they’re doing. Maybe you have great mentors who tell you exactly how to do things right. If you do, you’re among the lucky few – use it to your advantage!
While certain values may serve you well in the short-term, there’s no saying how useful they’ll be in the future. When a business grows (and particularly when it grows rapidly), systems, people, and processes break down. New priorities emerge, new approaches are taken, and if you do everything right, your business will have a real chance of surviving.
Busy x Effective
Allowing your success or failure to be left to chance, simply because you haven’t taken the time to consciously figure out your core values, is a terrible waste. It’s very easy to get caught up in the rush of getting things done as a small business owner. However, there’s a difference between being busy and actually being effective. The first merely requires a work ethic (which is undoubtedly useful, make no mistake), while the second requires additional forethought and planning.
In this article, we’re going to be diving into what it means to have core values as a business. We’re going to look at why YOU, in particular, should care about this (hint: it’s not just for the CEOs of Fortune 500 companies). Finally, we’ll move on and take a look at a really interesting mental model that will help us make decisions around our values.
What Are Business Core Values?
We’ve already touched on the definition of this term informally up above. Simply put, a business core value is something that influences the decisions you and your employees make because you consider it to be important. A value is some quality that we aim to live and die by. It’s a qualitative measure, not a quantitative measure. In this sense, it’s binary – we’re either giving sufficient attention to the value, or we’re neglecting it.
What Are Some Examples of Business Core Values?
Once again, this is probably a topic you’re at least loosely familiar with. Rather than boring you with a dull list filled with vague language, let’s look at a real-life example of a company’s core values.
As we can see here, this particular company has listed values such as “integrity”, “innovation” and “environmental protection” as the things it cares most about. Such sentiments are common: you could probably find most of these in the mission statements of any big company.
There is a tendency among businesses to put on a good show for the public. It’s common to see businesses take an interest in promoting environmental protection, citing it as a major concern for their operation.
It’s also common to see one of these companies tangled up in a scandal, arising from their failure to abide by the principles they claim to care about. Volkswagen’s recent false emissions scandal comes to mind as an obvious example of this – the cost of that little slip up is currently estimated to be somewhere above $18 billion.
Talking is easy. Acting is harder.
This doesn’t just apply to massive companies. Volkswagen’s failure to stick to its stated principles has ended up costing them $18 billion. If you fail to stick to your principles, what do you think the likely result will be?
If you said “I will disappoint my customers and jeopardize the future of my business”, then you’re right.
People put up with a lot of nonsense from bigger companies because, oftentimes, there’s little to no competition – and if there is competition, they’re often just as bad. Practically every bank in America was wrapped up in the financial crisis in ‘08, but did you close your bank account?
Smaller businesses are not afforded this same luxury. If an electrician is unreliable, he’s unlikely to get many referrals. If a bakery produces poor-quality goods, their customers won’t come back. These businesses don’t have a large enough customer base to not care about these things. It’s for this reason that you have to care about your values. Figure out how things are done right, then stick to your word.
Is failing to live by your values a problem? Of course, it is. However, the consequences of this failure affect more than just you. Employees look to their leaders for guidance. Oftentimes, this is unconscious modeling – they behave in a manner that they see as tolerable. If you expect them to stick to the values you espouse as an organization, then it’s important for you to do the same.
The particular values you choose (within reason of course) matter less than just having values that everyone in the company lives by. Above all else, you need to value consistency of operation. This is particularly true when your business is growing: failure to keep behaving in the way that leads to growth in the first place often leads to the company going off the rails.
Obviously, you have more leeway when your business is small – you can get by fine, even if you’re the only one who really understands the core values the firm aims to abide by. Beyond these early days, consistency is king.
More than anything else, your business needs direction – direction provided by your core values. To grow effectively and efficiently, everyone needs to be running in the same direction. A business that fails to get this right will not grow for long.
Now, having covered things from the perspective of a small business, we’re now going to look at why values matter to larger organizations.
Case Study: Starbucks and Wells Fargo
We now understand what a core value is, and we’ve also gained an understanding of what these values may be. However, it’s one thing to comprehend these concepts in theory – it’s another thing entirely to understand how they play out in real-life scenarios.
First, we’ll examine Starbucks and its core values.
It’s interesting to note that Starbucks has listed both profitability and good customer relationships as two of its core values. It’s likely you’ll see this among most successful businesses worldwide. Balancing the pursuit of profit with the client’s satisfaction is a key task for any business owner, one that they have to dedicate themselves to achieving.
Their commitment to supporting communities is seen by looking at their work with the Starbucks Foundation. With activities ranging from providing water to Third World countries, to supporting veterans, they fulfill their promise to “contribute positively” to the communities they’re a part of.
These core values to guide decision-making, aiding strategic thinkers as they aim to make the right choice in any situation they face. Since its founding in 1971, Starbucks has grown from a single retail location to a globally recognized brand, enjoying massive and stable revenues, even in times of economic distress.
It is an undeniable fact that the careful selection of useful values was a massive part of their success. These values are an invaluable guide as a business grows, offering support and structure to augment the expansion of an enterprise. Keeping this in mind allowed one of the world’s premier franchises to emerge. Everyone was running in the same direction, working to achieve their goals in perfect harmony…
The values above are exceptionally well-calibrated, offering Starbucks both firm direction and distinct flexibility. By dedicating themselves to pleasing customers, maintaining long-term profitability, and creating an excellent working environment, they leave themselves in an excellent position to deal with any situation that emerges. Overarching market trends, emerging dietary practices, and changing consumer tastes can all be dealt with in turn without compromising their values.
On the other hand, we can look at Wells Fargo.
The first thing that you notice has a much longer list of core values than Starbucks.
The second thing you’ll notice is the presence of a “Customer Satisfaction” section. If you’ve been keeping up with the news, this is hilarious – and tragic. Wells Fargo’s behavior perfectly exemplifies what it means to have hollow-core values. It’s clear that in their case, they valued profitability far more than they valued their customer’s satisfaction. By opening 2 million unauthorized accounts, they defrauded their customers, abandoned critical values and cost themselves almost $200 million in compensation & fines.
It’s one thing to hang a mission statement on the wall, or to post it on your website… but it’s another thing entirely to act in accordance with it. As the inimitable Bill Bernbach once said:
“It’s not a principle until it costs you money.”
Remember: we’re not trying to come up with values that look great on that plaque hanging in the lobby. What we’re really after is a framework that helps you and your employees to make the right choice in every situation.
And/Or Thinking: A Mental Model to Help You Pick Through This Mess
Based on what we’ve discussed up to this point, it’s obvious that values are important.They offer guidance to employees in decision-making situations and help to direct the firm in a way that managers want.
However, it’s important to remember that it doesn’t matter how well-chosen the values are unless everyone in the organization is on board with them. The noble intentions of top-level managers are irrelevant if front-line employees are acting in completely different ways (see Wells Fargo example above).
By sharing values throughout the organization and making them a part of your culture, you can ensure that everyone is on the same page. In turn, this will mean that decisions made by your employees (by and large) will be in alignment with one another. Over time, this snowballs into constant progression in the direction of your choosing.
From the above, you can see that it doesn’t matter if you have 10 employees, 100, or 1000. Regardless of how big your business is, you need to ensure that all employees are working towards outcomes that contribute to the business mission. The best way to ensure this is happening is by making sure that they understand the most important values to concern themselves with.
Of course, it goes without saying that every employee who’s not fully on board with your values will inevitably slow down progress. One poorly-trained customer service rep can give an organization a bad reputation, even if everyone else is totally on board with your values.
When you examine why your employees aren’t buying into your values, you may find that there are a few major reasons. One could be that they simply haven’t been told enough about them. Maybe managers can do more to inform them about best practices, the reasons why they’re doing something, etc. Simply put, if it’s down to a lack of education, it’s easily fixable.
On the other hand, they may understand the values but could be caught up in false dichotomous thinking. People often assume that a given situation has one clear solution among a very limited pool of options. Being too eager to view the world from a strict black-and-white paradigm leaves you blind to the countless shades of grey that lie between them.
Becoming too focused on choosing one option or another is more commonly known as “Either/Or” thinking. You are presented with two choices, which, in your mind, cannot co-exist. You must choose “Either” this one “Or” that one – nothing else.
Unfortunately, such an approach is rarely appropriate. Sure, it may work sometimes, but in the majority of cases, it merely leads to inefficient outcomes.
Fortunately, there exists another model that can help you out. It’s called, “And/Or” thinking.
But what is “And/Or”?
“And” refers to those times when your values can be considered jointly. You don’t have to pick one over another, you can have both!
This kind of thinking usually applies to situations that we view as black-and-white. Take a housing contractor as an example. When completing a project for a client, they may be faced with a number of opportunities to cut corners, boosting their profitability (at the expense of the client). They may even contemplate fraud, pretending that material and labor costs are greater than they actually are in order to boost their prices.
In this case, it’s easy to assume that we’ve got two values in direct opposition to one another – profitability and customer satisfaction.
However, as you know, life is rarely so clear-cut.
It’s possible that there is a number of options that could both boost profitability and increase customer satisfaction. If the business can source materials of sufficient quality at a lower price than before, then they can increase their profits and (if they choose) reduce the cost to the client. The result of this is the fulfillment of both of these objectives.
It’s important that employees don’t become too obsessed with one value over another. They need to understand that some compromise is okay. As long as it keeps the business moving towards the fulfillment of its ultimate vision, it’s perfectly acceptable.
This is a simple example, one that’s grounded in reality. A more theoretical framework that you may be familiar with is the “triple bottom line”. This is an accounting framework that aims to determine the full cost of business actions by considering their impact on three dimensions: economic, social, and environmental.
Assessing the total cost of different options by viewing decisions through these three lenses is a useful tool, one that allows business owners to understand the full implications of their actions. These three areas are ones that lend themselves to different qualitative factors. Economic cost will be concerned with maximizing profitability, environmental cost will be concerned with corporate responsibility and conservation efforts, and the social cost will deal with the satisfaction and well-being of everyone the business encounters. These costs are judged concurrently, so the business can see the whole picture they’re dealing with.
Learning to view different options by applying our “And” model will help us to better navigate those times in life when we can compromise or innovate, creating new solutions that address all of our needs. It’s not always a case of choosing between two extremes – there are often a whole lot of in-between options with the potential to serve us well.
We’ve covered a lot of ground in this article. We started out by discussing what value was in the context of a business. We talked about why they’re important to you as a business owner, regardless of the size of your organization. Whether you’re as global as Starbucks or just a local operator, getting caught up in the rush of doing (instead of stepping back to ensure the right things are being done) is a recipe for long-term disaster.
It’s not enough to just have values – everyone in the organization needs to abide by them. We examined how this was obvious when we talked about Starbucks and Wells Fargo: one of these organizations embodied their values, while the other betrayed them.
While these businesses are probably a lot bigger than yours, the lesson still stands. If you don’t ensure that all your employees are on the same page, then you’re setting yourself up for failure. Introducing your employees to the “And/Or” mental model can help them to avoid getting caught up in false dichotomous thinking. This one tip, by itself, can help you to avoid countless mistakes.
Understanding how you can respect most/all of your values in various situations is important. By opening up your mind to the consideration of countless other options, you avoid getting caught up thinking in extremes.
Your Next Steps
- Consider your core values as a business. Is it something you’ve given thought to in the past, or are you caught up in the rush of getting things done?
- If you have core values, consider how they still apply to your current situation. Maybe you chose them when you first started out. Maybe you chose them when your business was moving in a totally different direction.
- It’s one thing to understand these values yourself, but do your employees understand? Are your standard operating procedures, processes, and frameworks modeled with these values in mind? Are they put into practice?
- If you think that your employees frequently get caught up in false dichotomies, teach them about “And/Or” thinking. It can save you from months of friction and stress if done correctly.