"What do you mean "passionate"? Stalin was passionate. Would we hire him?"

It was 10 years ago and I was CEO at my previous company. I had been called out by an employee on one of our core values of only hiring "passionate" people. I fumbled my way through an excuse, but they were right. We had done a great job with a purpose and vision, but the values were vague, trite, and ultimately useless in decision-making or inspiring people. It was like asking the contractor working on your house to "make it more interesting."

Fast-forward to a few weeks ago. I just went through process again of documenting values for my new startup. My partner and I got in front of the whiteboard and asked the question: "What matters most to us?" For the next 30 minutes, my arms worked faster than the Peanuts characters decorating a Christmas tree, and before I knew it we had filled the board with more marker than white space.

Thanks to experience, it was much smoother this time around and we were happy with the result. Over the next few weeks, we would merge, shape, and fine-tune them into something that worked, while still leaving room for them to evolve.

As I reflected on what was different this time, I thought about what I would tell my younger self that would have saved me time and pain.

1. Values can be a vital recruiting and sales tool.

Values can be as important a differentiator as your product road map. In addition to the incoming personal values of the founders, consider the issues that have plagued your industry for awhile (poor customer service? political workplaces? boring products?) and how you can be the hammer-thrower who destroys your market's screen. The values will strike a chord with potential employees and customers, and they'll jump at the chance to work with you.

2. Clarity, uniqueness, and inspiration make them sing.

I like the idea of "integrity" as much as the next guy, but don't throw your pet buzzwords up on a wall and call it a day. Describe the value in a way that makes sense and puts gas in people's tanks. Write it in a way where you could envision it ending an argument. Whereas last time I would have written "We thrive on teamwork and innovation," this time the value is "We're in it together. Different functions value and respect each other. Innovation is driven by the entire company, not just coders. No functions are second-class citizens. We strive to be tight, whether we are 30 or 3,000 people."

3. Give them time to breathe.

My first time around, I had to have all the answers--anything less would be a weakness. And values were no exception. I felt they should be set in stone from day one. Turned out, they were more like clay as it's exposed to air--they were flexible for awhile, but hardened as we got to 40 or 50 people and more feedback surfaced. Some people may argue that you want values set by the founders from the beginning, but my experience is that it's OK for them to be shaped over time. And your early team will feel more ownership over them as a result.

If you think about setting company values as a checkbox next to "incorporate" and "buy espresso machine," you'll likely end up with a jumble of garbage that puts your employees to sleep. Spend the time, do it right, live the values, and let them grow, and you'll form the basis for something people can get passionate about. But, you know, not Stalin-passionate.