How to Create a Company Philosophy: Don't Put It Off
Understandably, many companies set their sights on becoming profitable and delay the task of thinking hard about what they stand for and building that into their business. But experts say that founders and owners ignore crafting a philosophy at their own peril.
"What typically happens is that business people will want to talk about their products, their delivery systems, their profitability models. They'll want to get right down to the nitty gritty," says Alex Plinio, co-founder of the Institute for Ethical Leadership at Rutgers Business School. "But what tears businesses apart aren't necessarily those kinds of things. What tears them apart is people that don't get along with one another; they have different values."
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How to Create a Company Philosophy: Practice What You Preach
The principles in a company's philosophy have to come from, and be true to, the founder or CEO as a person. For example, "if you have a hard-driving, aggressive, Type A person [in charge of a business], having 'play nice with others' as part of your principles is not going to work," says Steve Priest, president of Ethical Leadership Group (ELG), a consulting firm specializing in ethics and corporate responsibility.
As the founder or owner of your company, you should extrapolate your values by running through a number of hypothetical scenarios. Create quandaries for yourself, in which there are tradeoffs between profits, customer experience, and ethically questionable practices. See how you think the company should behave in each of these circumstances and a picture of your values will begin to emerge. Other exercises can include brainstorming what words or concepts you want people to associate with you and your company, or perhaps more tellingly, seeking out your biggest critics and soliciting their input.
Two examples of CEOs whose values suffuse the products and strategies of their companies are Steve Jobs and Jason Fried. The Apple CEO is notorious for his micromanagement style and the same need to control every detail manifests in the rigid control over the App Store. By contrast Fried, the head of 37signals, has created multiple open source tools such as Ruby on Rails, a programming framework, and Prototype, a Javascript framework. This openness is mirrored in Fried's willingness to experiment with things like four-day work weeks and funding employees' passions.
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How to Create a Company Philosophy: Keep it Simple
For a philosophy to really be actionable, it should be succinct, something any employee can hold in mind when they come to a decision-making crossroads. Priest recommends keeping the number of tenets down to three, though he breaks his own rule. He summarizes ELG's values in four principles: serve clients, make money, have fun, and change the world. Still, if you go far above three or four, Priest says, the "retention rate, which is linked to actions, decreases considerably."
On the flip side, you don't want to oversimplify things. Your corporate philosophy should strike a balance. Ulrich warns that, "Only focusing on details makes [your philosophy] non-memorable and no one will wade through it; managing by slogan is superficial and does not lead to accountability or change." As mentioned earlier, the philosophy is at a level of specificity between that of the mission statement and the code of ethics. It should encapsulate your ideology in a memorable way without being reductive. One way to do this is to have a bullet point list of core values but expand upon each one in a brief paragraph.
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How to Create a Company Philosophy: Hire People Who Match the Culture
Understandably, many companies don't think about their principles until they start making hires. Priest put his company philosophy in place "as soon as I was hiring a full-time employee because I was hiring her from a much bigger company and her question was, 'what do you stand for,' so she challenged me."
Other experts suggest that a philosophy becomes essential when the number of employees starts to grow ungainly. "In small companies, the identity is shared like bumper cars where people talk, run into, and see each other daily. This identity does not need to be codified and disseminated; it is lived," Ulrich says. "Crafting a philosophy statement, or identity, becomes helpful when the 'bumper cars' no longer bump into each other" as may happen in larger firms.
Even when you have face time with all your employees, it's not enough just to talk about your values. You must assess them, say by kicking off a meeting with how recent accomplishments or setbacks fit into the framework of your different values or rewarding employees for behavior that is exemplary of the company philosophy. If you don't do these things, your employees will figure out what's really important to you and to the company, namely profits.
That's why, as the company grows, the human resources department is integral for showing new hires and current employees what company priorities are. Those priorities should be reflected in all HR processes including recruiting, performance evaluations, promotions, and rewards.
For example, if you're only hiring based on the skills of the job candidates, you're only getting half the picture. As Ulrich puts it, "Technical fit without cultural fit is a misfit, and the employee will be competent, but not contributing to business success."
You can craft your interview questions to elicit the traits you value most in prospective hires. For example, Jim Sheward, the CEO of the Internet-consulting company Fiberlink wants a staff with integrity so he asks interviewees about their biggest career mistake to date and looks for reflective individuals who have learned from their errors.
Odder questions can often give you more insight into people's personalities. Robert Baden, the CEO and president of Rochester Software Associates asks potential hires, "If I stood you next to a skyscraper and gave you a barometer, how could you figure out how tall the building was?" There's no correct answer, Baden is simply trying to gauge the applicant's creativity and quick thinking.
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