In a recent Inc. article that begins, "Your company's values are everything," scores of company founders and business authors share insights on how they built a values-based enterprise, highlighting advice on defining values, communicating values, and living values. Inc. Deputy Editor Doug Cantor rounds the article out with some key statistics, including the most cited value (I recommend taking a moment to read the article--you'll find out what it is).
After decades of coaching businesses on how to improve financial results and the lives of the employees who drive those results, I couldn't agree more with the importance of company values. When utilized well, they align employees with a common perspective and provide a strong foundation to base every decision your company makes. I also noticed three things.
- None of the company founders or business authors mention the value of being profitable.
- There's a significant disconnect in the function of values for CEOs (94% feel a personal responsibility to lay out their company's core purpose and role in society) and employees (23% strongly agree that their company's values guide the decisions they make at work).
- It's clear that for many companies, the high-involvement process of developing company values is helpful in enhancing company culture, in and of itself.
Frankly, the first doesn't come as a surprise. I can't think of many companies who tout making money as a core company value. It seems any mention of profits is unfashionable, and maybe it is.
But there's always an exception, and this one is notable. During the height of the pandemic, when values were tested and many companies failed, Southwest Airlines remained steadfast. The value it placed on employee job security was clear; the company maintained its legacy of no layoffs, unmatched in the airline industry. We penned an HBR article at the time about three major American companies who managed to thrive. Spoiler: SWA was one of them.
Of course, it's easy to commit to values when it's smooth sailing, and another when it's survival mode. During this time, then SWA president Gary Kelly was clear that profitability was an ongoing value for SWA, as it funded a strong balance sheet, enabling the company to avoid layoffs. Profitability was a way of keeping and caring for their employees when it mattered most--the only way, really. Running your business so you never need layoffs is, on its own, an expression of valuing the people who make your business run.
You might say it's easier for an industry giant to make ends meet without compromising values. But our experience working with a 40-person design/build firm based in Boston, called Adams + Beasley Associates, makes the same point. And it goes a step further. That disconnect we mentioned--the one between what a CEO believes their company should be doing, and what the employees are actually doing--is bridged by partnering with employees every step of the way.
Eric Adams and Angus Beasley decided to base the business on the premise of aligning the company's interests with employees' self-interest. This meant helping employees understand the economics of the business and allowing them to participate in those economics meaningfully.
They began by surveying employees to gather ideas on how to improve the business, and used that information, along with input from customers and from the financials, to decide what the company should focus on. The key metric was gross profit dollars generated by each job--a number that every person at the company had a hand on. They created a scoreboard so that everyone could see exactly how gross profit dollars were generated and track the numbers whether they rose or fell. Importantly, they established an incentive plan that showed what the bonus payout would be depending on how strong their results were.
Before long, employees came up with $128,000 in potential savings on labor efficiency, and a total potential gross margin increase across all four categories of close to $900,000. That represented about a 40% increase in gross margin.
During the pandemic, Adams + Beasley were hiring employees while most of their industry peers were letting people go.
In making the case for profitability, as leaders like Gary Kelly and Angus Beasley might:
- Being profitable enables you to continue to grow and serve your customer and your employees well.
- Being profitable makes it clear that you are providing a product or service that customers truly value.
- Being profitable demonstrates that you are competitive, and therefore deserve to continue doing 1 and 2.
Why not be transparent about what matters? If what matters to you as a business is your financial results, in order to improve the lives of your employees and customers, that makes a lot of sense. Partnering with your employees to serve customers profitably and create sustainable jobs makes sense. Let's not be too shy to talk about the things profits enable the company to do--it's as foundational as customer service, or integrity. It makes sense to take values seriously. We would add that it makes sense to take values pragmatically.