The values companies live by are becoming increasingly important for today’s consumers and employees. A recent survey from Deloitte found that both Millenials and Gen Z were willing to remain with a company for longer if they were happy with its environmental and societal impact. They were also willing to reject job offers if the companies failed to align with their values. As each new generation shows a clear favoring toward values, it will become increasingly important that companies become values-based businesses to attract and retain talent—and potentially even improve the employer and consumer experiences.
But keeping a business in line with its declared values can be difficult. The recent collapse of FTX highlights exactly what can happen when your values become untethered from your business. Whether your company is losing track of its original values or not delivering on them as promised, this hints at an imbalance between what people want and what’s practical for business. As values-based companies become more important to people, it’s crucial that companies are able to answer the question of what a successful values-based business actually looks like.
As an organization working to educate the next generation of entrepreneurs and business leaders, we’ve considered what it takes to do exactly that, and we believe that much of it is a matter of balance.
To succeed, values-based businesses need a more measured approach
The way to approach values-based goals and planning is to ask not only how a venture or business is adding community value but what that value-add is actually worth to customers. If it’s not worth what it’s costing to produce, then chances are good that it’s not financially viable.
In order to be sustainable, a company’s values need to align with its performance—not drag it down. For example, environmentally friendly products often cost more than their environmentally unfriendly counterparts. So, if a startup is looking to create a product that’s better for the environment, leaders need to ask themselves if consumers are willing to pay for the extra cost that goes into making it? This is because a values-based business usually needs more than good intentions to succeed—it needs to be able to earn its keep.
While a values-based business should have its own set of values, these values should also reflect the community that the business resides in or markets to, the values of its customers, and the values of shareholders. This can be part and parcel of being financially viable. If your consumers, community, and shareholders all believe in the values of your business and the products or services you produce, they will be more likely to stay loyal customers.
How entrepreneurs and startup leaders can successfully lead with values
Leading with values is admirable and can be immensely profitable and beneficial to the community. Research has shown that values-based brands perform 134% better than others on the stock market. But this approach needs a commitment that amounts to more than just lip service—it requires a strong belief in establishing business values and mission with a solid foundation on which they can grow. Here are a few places to start:
No matter how skilled business leaders may be, they can’t manufacture intrinsic value—it needs to already be there. Leaders need to truly believe in what they’re doing rather than using values as a means to gain financial independence or be their own boss. It’s got to be genuine. If it’s not genuine, then don’t do it.
Quite a bit of environmental, social, and governance (ESG) investing, for example, is done on the backs of marketing glitz and little else. In a 2022 report by The Harris Poll, 86% of executives polled believed their company’s ESG efforts were making a difference, but only 36% of executives reported having tools to measure that difference. On top of that, only 17% are using the results to optimize their efforts.
The same is often true of social responsibility and diversity efforts. Too often, a single person is hired to head up these initiatives but given few resources to actually get the job done. The end result is that the values espoused by these positions don’t actually add up to anything beneficial for the community or for the company. Part of being genuine in the business world is making sure your efforts have the intended impact, so while you’re running your initiatives for ESG or EDI, don’t forget to check in and make sure the results are as expected.
Focus on doing one thing of value well
For those who truly have values as their central mission, the next step is to ensure there’s a viable enterprise to support it. This doesn’t mean figuring out how to turn a 50% profit or becoming the next Facebook; it means being able to do one thing well. This selectivity of the mission is the foundation of efficiency, and it helps to determine the fundamentals of performance for a startup.
An excellent example of this in action comes from Aravind Hospital in India. The late Dr. Govindappa Venkataswamy was one of the best cataract surgeons in the country. He brought people dealing with cataracts to the hospital and helped to restore their vision for free. In order to sustain this practice, he created a system where wealthy patients would receive this same treatment but could pay to have a private room rather than lying on a mat on the floor with others.
As a result, he managed to turn a 51% profit, making it possible to continue to help others and put money back into the community. If he had tried to do this for every single ailment in the hospital, the whole thing would have likely collapsed. But by focusing on one thing he did well, he could excel and make a real difference in people’s lives.
Don’t ignore the importance of performance
A popular approach for Silicon Valley startups is to endure losses for as long as possible in the hopes of being able to monetize later. While this has worked in some cases, it doesn’t change the fact that it’s bad business. Entrepreneurs should focus on profitability, not creating short-lived buzz.
Simply put, your business must be profitable to produce results. If you want to sell innovative products, create a workplace that benefits the employees that work there, or donate your profits to charity, it must be successfully funded to graduate from a dream to a reality.
A model centered on performance still holds true in a values-based company. To perform and make a difference, a values-based company makes decisions that will benefit the company, its employees, and its clients/customers to be financially stable for the long haul. If you want to become the entrepreneur or business leader that you aspire to be, remember that your values can and should go hand-in-hand with financial success.