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There’s a cynical and quite popular view about business, to the effect that it’s “all about the money.” You hear from inside the business world (sometimes in popular expressions like “greed is good” or “business is business”) and outside of it (from people who believe there’s something inevitably selfish or aggressive about business).
While this view does describe a slice of reality, it’s ultimately reductive and incomplete. The bigger picture is more complex and nuanced.
To be successful over the long run, a business must continuously deliver benefits to a series of stakeholders. Investors and employees, partners and clients, vendors and even governments: all must benefit from the continued existence of a business to keep contributing to its growth and flourishing. Keep penalizing any one of these constituents, and the natural karmic wheel starts turning, creating losses and offsetting gains in ways both visible and not.
So, how do successful businesses keep this web of interlocking interests tightly knit? Financial incentives undoubtedly play a part. So do opportunities for engagement and personal growth. But there’s also something deeper. Something that plays to people’s sense of identity and fosters trusted, long-term relationships. Enter values.
In their simplest form, values are basic principles that favor some goals, attitudes and actions over others. A value practiced by a person or group becomes a virtue of that entity. A team of 40 psychology researchers has identified six core virtues that exist in virtually all cultures: wisdom, courage, empathy, justice, temperance and transcendence. In the world of organizations, classic examples of values are Bridgewater’s radical transparency, the Navy SEAL Ethos and Band-Aid’s standards of safety.
To serve their purpose, values impose preferences and priorities. They mean that when faced with trade-offs, you systematically prefer some options and choices over others. A bunch of nice words that claim to value everything good equally is not the same thing as a set of authentically held core values. Values imply commitment, sometimes even sacrifice.
Jim Collins, the best-selling author of Good to Great, has spent decades studying the DNA of successful businesses. His team has combed through mountains of data to complete their evidence-based comparisons. On the other end of this analysis, Collins writes that there is but one non-negotiable element for any business that strives for greatness. It isn’t a trendy strategy, insight or hack. It’s something that sounds a bit old-fashioned but that the data shows is much more important: A company must have a set of core values that do not change.
Here are four reasons why values matter so much in business:
1. They help define culture
Culture is about much more than office swag, perks or dress-down Fridays. It’s made up of all the elements that make the reality of a business coherent to its stakeholders — from the factors that truly drive its decisions, to its policies and work modalities, all the way down to team dynamics and the tone that people use to interact with one another. In elevating some goals over others, values provide the settings that define a work culture. Silicon Valley is known for a more relaxed work environment and collaborative work methods, both of which are conducive to creativity. Wall Street law firms are more buttoned up, valuing prudence and discipline to established standards more highly. Each culture works in its own way and is upheld by a different set of values.
2. They cement relationships
Relationships are built around shared expectations of future behavior. When these expectations are met, mutual trust builds over time, justifying higher levels of joint commitment. A set of shared values creates benchmarks for behavior and dispute resolution. Research shows that an adopted value becomes a reliable indicator of future behavior. For example, one study found that the correlation between honesty scores across situations is greater than the correlation between cigarette smoking and lung cancer. Since authentically held values are so helpful in predicting behavior, it’s no wonder they’re a critical component of quality, long-term relationships.
Related: The Power of Having Core Values
3. They coordinate efficient decision-making
Leaders often don’t have the bandwidth to micro-manage every decision. With a clear set of core values in place, stakeholders can better determine which options and choices are preferable on their own. Values provide heuristics — decision-making shortcuts — during times of uncertainty or compressed deadlines. Decisions can then become more decentralized and efficient while staying true to a company’s long-term goals and identity.
4. They sustain a company’s mission
A mission or purpose can set the overall direction of a business, but values are the vehicles for how it wants to get there. Research suggests that companies with a sense of purpose tend to grow faster than those without one, but purpose alone isn’t enough. A set of core values that are congruent with the broader purpose of a company gives shape to the journey.
For all the usual emphasis on words, however, values ultimately come down to actions. Otherwise, nice words on paper inevitably turn to confusion, cynicism and chaos. For this reason, one value perhaps lies at the center of all others: the value of integrity. Integrity means the authentic alignment between words and actions. There’s a fine line between genuine confusion with moral uncertainty and paying values mere lip service, carrying them out only when expedient. Human beings are usually smart enough to tell the difference, especially over longer stretches of time.
In short, values can provide businesses with a key combination of structure and flexibility to achieve their many goals. If your business hasn’t established or fleshed out its own core values yet, you now have a deeper understanding of why they matter so much. So, ensure that yours are authentic, unchanging and maintained throughout your organization.