Why strong values are good for business

Twenty-one years after Ray Anderson founded his carpet tile company, Interface, he had an epiphany. 

After reading Paul Hawken's book The Ecology of Commerce in 1994, which Anderson described as a “spear in the chest experience,” he became an ecological evangelist.

Anderson’s environmental values transformed his company’s performance. Mission Zero, Anderson’s “promise to eliminate any negative impact our company may have on the environment by the year 2020,” inspired the company’s people. Mission Zero continues today, even after Anderson’s death in 2011.

The business case for ethics and values

Mission Zero transformed Interface’s manufacturing processes and bottom line. What started out being the right thing to do turned into good business sense.

It’s an example of the power of business ethics, values and purpose – in short, the impact of organisational culture. Surprisingly, culture has more influence on business performance than strategy, according to a study in the United Kingdom.

Studying over 100 companies over an eight-year period, Professor Michael West of Lancaster University Management School showed that an organisational strategy accounted for 2 per cent of performance variability, while organisational culture accounted for 17 per cent of performance variability.

That’s a big difference. So how can leaders instil great values across their companies?

The power of purpose

No company can determine its values without understanding its purpose, says Carolyn Tate, author of Conscious Marketing and the founder of Melbourne’s Slow School of Business. “Values are not worth anything unless the company has a higher purpose than profit that addresses the big questions: ‘Why are we here?’ and ‘How is the world better because we exist?’”

Stephen Johnson builds communities. After 20 years fostering grassroots social movements, such as the Millennium Development Goals (Malaria) for the United Nations, Johnson now helps companies become more like communities. He also stresses the link between purpose and leadership. “I help organisations work out what that purpose is for them, and work out their values and how they engage with stakeholders.”

Both Tate and Johnson are adamant that developing purpose and values is a collective process, not a top-down one, decided in isolation by leaders or, worse still, by an advertising or brand agency.

When stakeholders help develop values, they believe in them. The challenge for leaders is to find a process by which they can involve all stakeholders, including customers, suppliers, director, shareholders and staff.

Eliciting honest feedback can be difficult in some workplaces, but a confidential survey can be a good way to start. “We need to create an environment where people feel they can be honest,” Johnson says.

Feedback needs to focus on strengths as well as weaknesses. Looking honestly at what is ‘broken’ in a business or industry is difficult, but can fire up everyone’s passion for change and provide a sense of purpose.

Four questions will elicit clarity, Tate suggests. These are:

– What are you good at?

– What do you love?

– What does the world need?

– What makes you money?

Many companies are too focused on doing what they are good at and what makes money, Tate says. However, when Ray Anderson thought about what the world needed from his carpet company – higher environmental standards from manufacturers – his business performance reached a new peak.

Turning feedback into change

The themes that emerge from feedback, both positive and negative, will provide impetus for change, Johnson says.

Leaders can tackle the task of change creatively. Some approaches might include:

– workshops to share discoveries and discuss solutions

– tasking teams to address the issues identified

– town hall meetings or roadshows to communicate the process, the feedback and the actions taken.

“Leaders will then get the productivity and performance of teams improving, because everyone feels like they have been invited to find the problems and discover the solutions,” he says.

Watch out for blind spots

In the hurly-burly of day-to-day operations, it’s surprisingly easy for values to slip.

The reason is that we have ‘blind spots’. We get used to doing business in a certain way, and can’t see beyond that frame of reference, says local business ethicist Attracta Lagan.

Creating a culture that supports ethics is the most important action leaders can take to influence values, Lagan says.  An employee who is empowered to do the right thing and who is committed to the company’s vision for itself will be engaged, productive and go the extra mile for the company and its customers.

Team approach

It’s clear that leaders play a key role in creating an organisational culture that supports strong values. But they don’t have to develop them alone. In fact, it’s more effective to involve all stakeholders. The process is one of asking the right questions, creating a safe environment for honest answers, and then engaging everyone in addressing problems.

In this way, the task of developing values becomes a team-building exercise and is more likely to result in a lift to business performance.

 Written by Kath Walters

The articles represent the views of the authors and not necessarily that of the Bank. You should seek independent professional advice before acting on any matters set out in the articles.