The New Era of Organizational Values

The criteria for doing business with, investing in, and working for a company have changed. Innovation, price, quality, a good customer experience, rock-solid marketing, and a strong employer brand remain the price of admission for any company. Among all the organizations in your sector that embrace those qualities, customers, investors, and employees still have to make a choice. Given this choice, companies that live their values will win. And they will win big.

We are entering a new economy in which what a business stands for is a deciding factor for stakeholders. Many consumers will actually pay more for products and services from companies who demonstrate their commitment to their beliefs. Top job candidates will take lower salaries to work for those companies.

Major investment firms are creating funds that are surging in value made up of just companies; “values-based” investing is a growing trend with funds (as one bank puts it) that look beyond growth potential to corporate practices, policies and business activities that are in harmony and with and support an investor’s principles when it comes to social responsibility; environmental, social, and governance (ESG) considerations; and investments made by the organization that will produce a measurable, beneficial social or environmental impact in addition to a financial return (known as “impact investing”). In 2016, investors seeking financial returns from companies that also produced improvements in social good totaled US$22.1 billion across 8,000 investments. Impact investing—less than a decade old in 2016—had US$114 billion in assets under management. On average, “meaningful brands” perform 200 percent better than stock index averages.

Companies focused on maximizing shareholder value at the expense of other stakeholders will choke on the dust of those (as the old saying goes) who are doing well by doing good.

While a collection of factors are in play, four key forces are responsible for this fundamental economic transformation: a crisis of trust, growing distress over the environment, a politically polarized population, and concern about how organizations treat their employees.

The trust crisis

Public trust in institutions of all kinds has sunk to record lows. In addition to business, the global population does not expect government, media, or NGOs to do the right thing. People increasingly believe these institutions are stacking the deck against them instead of working for them. Ignoring their anxieties, institutions pursue their own self-interests, heightening public anxiety. The deeper this crisis of trust grows, the more afraid people become. Fear arrests economic growth. As a result, 75 percent of the world population believes that companies should balance their pursuit of profit with actions that improve economic and social conditions in the communities where they operate.

Prioritizing the environment

The younger you are, the more likely you are to be concerned about the state of the planet. After all, millennials (born between the early 1980s and the early 2000s) and Generation Z (the post-millennial generation) are the ones who are going to have to live in the world the rest of us leave behind. The environment is the top concern for millennials. They are willing to pay more for sustainable products. They prefer to buy cars that use little or no fuel. One study also found that three-quarters of millennials factor an employer’s environmental commitments into their decisions about where to work.

Talking about a Nielsen global online study, Grace Farraj, the company’s senior vice president of Public Development & Sustainability, said, “Brands that establish a reputation for environmental stewardship among today’s youngest consumers have an opportunity to not only grow market share but build loyalty among the power-spending millennials of tomorrow, too.”

Millennials may have earned the label “Green Generation,” more environmentally conscious and active than their parents and grandparents, but they are not alone. As early as 2007, 53 percent of global consumers said they would rather buy products and services from companies with strong environmental reputations.

The environment plays a role in investment decisions, too. For example, Barron’s publishes an annual list of the top 200 sustainable mutual funds. The magazine said in 2016, “For decades, the derision aimed at ‘socially responsible’ investing was palpable. It was a style of investing that brought to mind visions of the Summer of Love and no-nukes sit-ins, earning the disdain of many on Wall Street. But the times they are a-changed, and investing with an eye toward companies with sustainable business practices is now considered, well, just good business. A company’s efforts toward sustainability, such as fair labor practices, good environmental stewardship, and diverse internal leadership, improves returns.”

Polarized politics

The growing despair propelled by the crisis in trust, the belief that the system is failing people, and their increasing lack of hope has led a large swath of the population to look for change in the shape of populism. As populist sentiment grows, the divides between the right and the left widen and differences grow sharper. Issues that were never political in nature suddenly have become political points of contention.

As a result, an ever-growing number of companies have felt compelled to step out of the shadows and take a position in societal debates. Through open letters, CEO statements, thought leadership, position statements, advertising, and marketing, companies are proclaiming the alignment between their values and the lengths they are willing to go to effect change.

We have, for example, entered the age of the “woke CMO,” according to Digiday. “The once-timid always-playing-it-safe marketer has become the corporate face of the Trump resistance—and has warmed to getting involved in fraught political waters.”

The woke CMO is not confined to left-leaning ideologies. Companies professing conservative values appeal to consumers who share those beliefs. Regardless of political leanings, though, the pool of organizations that think they can succeed by remaining neutral is evaporating as consumers line up with companies whose social beliefs reflect their own. It’s not just about attracting consumers who will buy from a company. It’s equally about fending off boycotts. A quarter of consumers in the U.S. have turned their backs on a company’s products or services due protests or boycotts stemming from its political positions.

Internal issues can also arise as company values move from benign mom-and-apple-pie statements to stakes in the ground. It’s not hard to imagine employees who vehemently disagreed with retailer Target when it announced transgender employees and customers could use the bathroom of their choice, yet had to choke back their opposition. How did the decision affect employee engagement? Job satisfaction? Had Target done an adequate job articulating its values so that this decision would not be a surprise (or a shock) to the workforce?

How companies treat employees

If trust in business is cratering, what can companies do to rebuild it? The top expectations of the public include actions you might expect: Offer high-quality products and services, for example, and listen to customers. But the top of the list, the attribute consumers list as most important in building trust in a company, is whether an organization treats its employees well.

Considering that front-line employees are significantly more credible as company spokespersons than the CEO, treating employees well has become a more urgent calling. (Overall, only 37 percent of people view CEOs as credible spokespersons for their organizations, according to the 2017 Edelman Trust Barometer.) Edelman CEO Richard Edelman told CNBC, “The world has flipped upside down. It used to be a pyramid of authority, now it’s upside down. The influence actually rests with the mid-level people, who speak peer-to-peer. If they’re for you, you win.”

With the rise of social consciousness among employees, and the dominance of millennials in the workforce (they will represent 75 percent of the workforce by 2025), treating employees well requires companies to go beyond competitive pay and benefits, satisfying work surroundings, and the usual array of considerations that occupy human resources executives’ minds.

Consider the start-up Loqules (which is pronounced “locals”), which offers young employees ways to have fun experiences while doing good. Companies availing themselves of Loqules’ programs (like cooking and eating with chef Louis Tikaram, surfing with Joel Parkinson, craft beer brewing with Oscar McMahon, and sprint training with Carmelita Jeter) can choose to share these “curated experiences” with people in need through partnerships with local nonprofits, giving their clients a chance to take part in the experience alongside company employees. Most companies that have worked with Loqules have opted for that non-profit partnership; these include the likes of Salesforce, Citibank, and Facebook. Most of those companies are repeat Loqules customers.

These types of employee perks—perks that connect the dots between individual and business values—shape a company’s culture. As we move deeper and deeper into the values-driven economy, making these linkages will command more and more attention from leaders.

Values and culture

Think again if you believe you can simply throw more money at your old-school corporate social responsibility (CSR) department. These bolt-on functions typically let companies check the social responsibility box while they continue to engage in practices wholly inconsistent with the values they evangelize on their corporate websites and in framed documents hanging on conference room walls. Setting up a stand-alone department that gives away money does little to change cultures, infuse processes, hold supply chains accountable, inspire employees, satisfy critical consumers, or create stories that stakeholders will share.

For too many companies, values statements have been lofty words that adorn websites and are printed on posters that hang from conference-room walls but do not catalyze day-to-day workplace behaviors or business decisions. I remember conducting a focus group with employees of a Silicon Valley company. The company’s values were printed on the back of the security badges they wore on lanyards around their necks. They laughed when I asked about the values.

“What’s funny?” I asked.

One of the employees replied, “Just last week the company promoted a guy to a senior executive position with the money, bonuses, stock options, company car, the whole package. He got the promotion because he blew away his sales numbers. He achieved that feat by violating every single one of these values. So you tell me. Should we pay attention to these values or should we pay attention to what actually gets you ahead around here?”

As this incident makes clear, communicating values is a matter of alignment. You can imagine the cynicism employees must feel when they see leader behavior trampling on the company’s stated values.

Ultimately, values must guide behavior in everything a company does, from the C-suite to the frontline, from who gets recruited for open jobs to which companies are invited into the supply chain. If a bank proclaims, “We value what’s right for our customers in everything we do,” then pressures employees to open new accounts for existing customers without their knowledge, the values become a source of derision, not a set of guiding principles. (Are you listening, Wells Fargo?)

If culture is defined as the way things are done around here (or, as puts it, “the sacred values, attitudes, standards, and beliefs that characterize members of an organization and define its nature”), then values are at the heart of that culture. I hope it’s clear that those values are not necessarily the ones that appear in recruiting materials and annual reports; they’re the ones that govern actual behavior and decisions. As business writer John Coleman puts it, “The originality of those values is less important than their authenticity.”

Communicating values to employees

Communicating values runs the risk of putting lipstick on a pig. That is, communicating values that everyone knows aren’t the real values can make things worse than not communicating about values at all. The first step, then, is ensuring leadership commitment to abiding by the values. If the company needs to do a values reset, be sure you play a role in it.

It’s also important to find out how employees interpret the company’s values. Former PRSA chair Rosanna Fiske noted that “generalized concepts—even oft-used words found in mission statements like ‘integrity’ and ‘commitment’—have different meanings to people from different cultures and backgrounds.”

Your values statement—the articulation of values that appears in company collateral—should be short and simple. If employees struggle to name the values, complex and wordy values statements are often at the heart of the problem.

Values must be more than words, though; they should be baked into your employee communication plan. Employees should never wonder how an initiative, action, or decision squares with the stated values (e.g., “We supposedly value diversity but every promotion to the C-suite in the last two years has been given to a white man”).

Values are best communicated by action rather than articles or videos about values. It begins with hiring people based on their values. It’s much easier to teach someone the skills required to do a job than it is to convince them to change their personal values to synch up with the company’s beliefs. Chick-fil-A shouldn’t hire a dour and ill-tempered candidate since its first core value is “Being consistently cheerful.” Climate change deniers probably shouldn’t work for Ben & Jerry’s, which has made “climate justice” a central operating philosophy.

New-hire orientations should overtly reinforce the company’s values lest there be any lingering questions about the company’s beliefs and the expectations that employees behave in a manner consistent with those beliefs.

Beyond that, the best communication shines a light on leaders, employees, and teams who have exemplified the values in their behaviors. In addition to the articles and videos employee communicators can crank out, we can advise leaders to raise values in their formal and informal conversations with employees. (A Deloitte study found 70 percent of workers who believed their companies had achieved financial success also said their leaders talked to them about the company’s core values.)

Formal recognition systems should factor values into their criteria. At the very least, nobody should get an award whose behavior contradicts the values. The reverse is also true: If the company parts ways with an employee (especially an executive) over behaviors that are incompatible with the company’s values, that should be communicated (even if you don’t name the employee).

Business authors James Collins and Jerry Porras argue that values are inherent and sacrosanct; they can never be compromised, either for convenience or short-term economic gain. Ultimately, communication should shine a light on the behaviors that demonstrate your company’s leaders, people, and teams are living those values.

Written by Shel Holtz for CW Magazine.