Why Your Company Needs a Set of Core Values (or Why Yours May Not be Having an Impact)

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Why Your Business Needs a Set of Core Values (or Why Yours May Not be Having an Impact) In The Trenches

Particularly in my early years as a CEO, I couldn’t help but roll my eyes whenever somebody suggested that I needed to codify and publish a set of core values for my company. Weren’t core values the tired, hollow, and meaningless platitudes that companies created simply because they felt they had to? Was it really that important to tell our stakeholders that “teamwork” and “ethics” and “integrity” were important to us as a company? Surely there were more important things that I could be doing.

As I came to realize over time however, my skepticism towards core values wasn’t because the concept of them was hollow and meaningless, but instead because so many companies had done such a poor job in establishing theirs, and as a result, their core values became tired platitudes that nobody paid attention to.

Without exaggeration, instituting a meaningful set of core values within my own company might have been the most impactful thing that I did in my 7 years as CEO. Establishing them and ensuring that we continually abided by them directly led to higher levels of employee engagement (3x growth between 2015-2020), lower voluntary turnover rates (less than 10% of payroll annually), and external recognition as one of the country’s best places to work (ranked 46th in the country for all companies with fewer than 100 employees). I don’t mention this to boast, but instead to illustrate the power of core values as a tool, if established and implemented properly. Among other benefits that accrued to us, we saved hundreds of thousands of dollars annually in recruiting, hiring, and onboarding costs as a direct result of our efforts.

Whether you don’t yet have a set of core values for your company, or whether you do have a set of values that are lacking any real impact, the first step is to eliminate the thought that core values are tired and clichéd niceties, as that will quickly become a self-fulfilling prophecy. Instead, think of them as a small set of vital and timeless guiding principles for your company. They’re there to define your culture, and to define who your people truly are, both as individuals and as a team.

You should use your core values to add a sense of clarity to everything that you do within your organization, including to attract like-minded people, to reward, recognize and appreciate existing employees, and to make more objective hiring, promotional and other personnel-related decisions.

Below are a few of the primary lessons that we learned over the years to make our values truly meaningful.

Discover Your Actual Values (Don’t Create Values That You Wish You Possessed), and Get Your Employees Involved

In order for your core values to be meaningful, they must represent values that already exist within your organization. At all costs, avoid “aspirational” values that you wished your company possessed. For example: If innovation isn’t a particularly important part of your business, and your employees aren’t particularly innovative, then listing “Innovation” as one of your core values is the first step to making them meaningless. In this way, establishing your core vales is a discovery process, much more than it is a brainstorming or ideation process.

Also be sure to avoid values that people are simply required to have in order to work for you. For example, we never listed “Ethical” as one of our core values, because in order to work for us, you simply had to be ethical. We didn’t need to be more ethical than any other organization – ethics were simply something that you possessed or you didn’t. If you didn’t, we wouldn’t hire you. If you include these types of “prerequisites” in your own set of values, you’ll be one step closer to them becoming devoid of any real meaning.

In discovering our own core values, we broke all of our employees into multiple groups of 5 people, and asked each group a single question:

If you could clone any of our existing employees to lead our company to world domination, don’t tell us who you chose, but instead tell us why you chose them.

The unit of output from each group was a list of characteristics (not names of people) that explained why cloning that person would lead the company to world domination. Because these characteristics defined people who already worked at our company, they were by definition not aspirational values. They described who we actually were when we were at our best. Just as importantly, because our employees played a central role in the creation (or, more accurately, the discovery) of our core values, their level of buy-in was far higher than it would have been had the management team codified the company’s core values on their own.

After a few rounds of removing duplicates and “prerequisite values”, and grouping similar characteristics together, we knew that we were looking at a list of our company’s actual core values.

Note that this process was taken directly from Gino Wickman’s book, Traction. All credit goes to him.

Tie Them to Stories

It’s often said that people rarely remember what you said, but they will always remember how you made them feel. It’s also been proven many times over that when you communicate a statistic (or policy, or rule, or anything else that you want people to remember) in the context of a story, retention levels are far higher than if you simply communicated the statistic, policy, or rule itself. This is critical when you communicate your core values internally, particularly when you do so for the first time. Instead of saying:

Our first core value is ownership. That means doing whatever is required to get the job done. Our second core value is …

Tie it to an actual story about one of your current employees. For example:

“Our first core value is Ownership, which means doing whatever is required to get the job done. Susan, last week I saw you live this value, and I’d like to share that story. Last week, without anybody knowing, Susan stayed at the office all weekend to help get a new customer online. This was never requested nor expected of her. She didn’t ask for praise or recognition, and she didn’t even tell anybody that she was doing it. She simply did whatever she needed to do to get the job done. Susan, you are the living embodiment of our first core value of Ownership”.

See the difference?

They Should Be Unique To Your Company

Your set of core values should be unique to your business. Each value itself doesn’t have to be unique, but your collection of values should be. Remember, core values are a timeless set of guiding principles that describe who you uniquely are as individuals and as a group. Selecting a set of vanilla core values that could easily describe any other randomly selected company won’t help you achieve this objective.

Values Should be a Carrot, Not a Stick

Even if you have a good set of values codified, they will begin to gather dust on the shelf if you don’t use them properly. Specifically, within your employee base, your set of core values should be viewed in a fun, light-hearted, and positive light. They should be used as tools to celebrate and reward, not as tools to reprimand or punish.

Though you’d be trying to instill the same value, there is a very large difference between rewarding an employee for living a core value, and punishing an employee for not living that same value. If your employees view your core values in anything resembling a fearful light, then they will lose all of their power.

One method that we used to keep our values light and fun was something that we called “Shout Outs”. Every Tuesday morning, the entire company would get together, and employees could “shout out” their colleagues for living a core value during the preceding week. We would hand out small rewards, and sometimes playfully embarrass the shout out recipients (a dramatic handoff of a giant trophy to thunderous applause, making them wear a giant set of sunglasses for the rest of the day, etc.). Though this may sound unimportant, it was a critical component to making our core values sticky (particularly given that this was done weekly for 5+ years). Fun makes your values stick. Intimidation and fear do not.

Operationalize Them at Every Opportunity

Coming up with your list of core values is the easy part. Making them truly long lasting and meaningful is the much harder part (similar in spirit to the idea that execution is always harder than strategy). One of the best ways to do this is to “operationalize” your core values as an important part of your company’s day-to-day operating processes. If you don’t do this, over time, they will lose their impact. Here are some ways that we “operationalized” our core values:

  1. Hiring: As part of our core hiring process, we made it mandatory for each hiring manager to ask all prospective employees a standardized list of questions that we thought best captured our core values. If the prospective employee didn’t score well on these questions, the hire wouldn’t be approved, even if the candidate was perfect in every other regard
  1. Promotions: When we promoted employees, and communicated those promotions internally, we rarely tied it to job performance, but instead to the extent to which the employee had consistently lived our core values. Over time, other employees learned that living our values was the best way to progress their career at our company
  1. New Employee Onboarding: Whenever we hired any new employee, from the CFO to the Secretary, on their first day I would personally meet with them for 1-2 hours to walk them through our company’s mission, vision, and values. In this way, from day one every new employee knew how important our values were to our business. Don’t delegate this task to somebody else – you as the CEO must do this personally.

Choose Your Names Wisely

Part of making your core values fun, approachable, and memorable (and thus sticky and meaningful) is in the names of the values themselves. For example, instead of “thinking like an owner”, we chose “We Take Out the Trash” (because owners always do whatever is required). Instead of “teamwork and interdependence”, we chose “Jenga”. Instead of “positivity and optimism”, we chose “Kaboom!”. Though this may sound like a small detail, it isn’t. As an employee, it’s a lot easier to forget “ownership” than it is to forget always having to take out the trash.

In Summary

You may read this list and say to yourself “that sounds like a lot of work”. And indeed it is. Though we rolled out our core values rather quickly, we methodically worked at them over the course of 5+ years to make them truly meaningful. They’re never really truly implemented as much as they are an ever-evolving work in progress. In my opinion, it is this demanding workload that causes most companies to either not institute core values at all, or to institute ones that quickly lose meaning over time. But I can tell you from personal experience that the work is worth it.

In the later years of my tenure as CEO, any randomly selected employee in our company could recite each of our values off by heart. I would walk by workstations, seeing one of my employees helping another one, and when they received thanks for their help, they’d say something to the effect of “No problem, that’s just Jenga”.

Once your employees start regularly referencing your core values throughout the course of their day-to-day work without your involvement, that’s when you know you have something special.

If you’re interested in learning more:

Traction, by Gino Wickman, is one of my favorite business books of all time due to its infinite practicality and usefulness. This is no ivory tower business book. Beyond providing a step-by-step overview of how to discover your company’s core values, it also describes an entire “operating system” that SMBs can follow that covers everything from goal setting, meeting structure & cadence, company-wide communication, and ongoing KPI tracking (among others). A must read for any entrepreneur looking to add some order to the chaos

Good to Great, by Jim Collins, is a seminal business book for a reason. In it, he shows how and why companies who employ a formalized set of core values tend to outperform companies who do not over the long-term. Beyond the core values discussion, this book contains several other very valuable tools and concepts that have now been employed by thousands of companies across the world.

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