Daniel Aronson: The Value of Values

Learn why aligning your business strategy with your values is the key to thriving amid uncertainty.

Many executives see values-driven initiatives, such as sustainability pledges, as a waste of money. But, as Daniel Aronson argues, integrating values into your business functions is vital to your competitive survival. It's time to acknowledge the notion that "values are a cost" is a fallacy, Aronson writes.

In truth, there's a strong business case for "doing the right thing." Learn why integrating your values into every business decision, policy and product can keep you competitive in a complex and uncertain global marketplace while also helping both people and the planet.

• The interconnected challenges businesses face today make values more crucial than ever.
• Today's customers care about companies' environmental and social commitments.
• Purpose-driven companies are more efficient, more innovative and "smarter."
• Navigate risk better with a "Threat, Vulnerability and Magnitude" (TVM) framework.
• Purpose-driven companies attract, retain and engage the best workers.
• Combine your values with aligned actions to prevent "values washing."
• Appeal to common values and lead by example to win followers.
• Embracing a "values lens" helps you stand out in a highly competitive, unpredictable market.

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Given the complex challenges business leaders face today, from realities of climate change to shifting sociopolitical contexts and evolving consumer expectations, your values as a business matter more than ever. In an increasingly interconnected world, no organization can evade the pervasive of "megatrends" such as AI or the rise of populism. Rather than trying to ignore these new global realities, address them in ways that reflect your values.

Many executives hesitate to make values-based strategic decisions because they can't see the tangible benefits of this approach. But values such as sustainability and customer loyalty aren't as "fluffy" as you might assume– you just have to look for the "submerged" or hidden value. Submerged value tends to exceed visible value  when it comes to initiatives centering around community, social, environmental or employee-related factors. In fact, aligning your strategy with people-and-planet-centric values can yield a return on investment that’s four to ten times higher than if you didn’t embrace a “values lens.”

Values-driven initiatives may yield other unexpected benefits, too. For example, a professional services firm organized a clothing drive to provide unemployed individuals hoping to return to the workforce with business attire. The clothing drive helped the community and tapped into submerged value, as many of the people donating suits wound up signing on as new clients.

“CORE” refers to the four main areas where your values can boost your business: Customers, Operations, Risk and Employees. Knowing what consumers value most deeply is important for creating loyal customers. Research shows that potential customers will be less likely to remember your company if your values only reflect your desire to increase your bottom line. But if you combine your desire for profit with values that reflect a desire to make a positive difference on a collective, societal level, people will be more likely to remember you. 

 People put their money where their values lie.

According to 2021 Bloomberg projections, by 2025, environmental, social and governance (ESG) assets under management (AUM) could surpass $50 trillion. 

Purpose-driven companies are more likely to increase customer “vocality” – their likelihood to tell others about your company. In a survey from Porter Novelli, 76% of respondents indicated that they’d tell family and friends about “organizations that are committed to both making money and making a positive impact on the world,” and 73% would defend the company against criticism and share stories or information about the company.  Consumers today expect brands to act as catalysts for positive change, believing companies should involve themselves in social and environmental issues. Connecting with customers based on shared values can foster deep emotional ties and turn their reliance on your product or service into a habit. Embracing your values also increases consumers’ trust in your brand.

Aligning your strategy with values can benefit your “CORE operations” in the following ways:

• Efficiency – Reducing your reliance on raw materials and cutting your pollution and emissions doesn’t just reflect a value to protect the environment; it’s also more efficient, as your company will achieve energy savings.
• Innovation – Limiting “options” that erode the dignity of human life – such as slavery in your supply chain – or cause environmental degradation prompts people to devise creative solutions to replace these unacceptable practices.
• “Smarter” business – Embedding values into your operations can make your company smarter. For example, when you center values, such as diversity and inclusion, you decrease the risk of groupthink – the tendency for everyone in a homogenous group to think along similar lines or share common blind spots.

Your values help you reduce risk, even during large-scale crises like global pandemics. Issues such as climate change create new risks for businesses. For example, your workers may find it too hot to perform their job tasks, or your insurance company might refuse to insure your business if flooding becomes more prevalent in the locale where you’re based. There’s no point in treating risks as something that might happen – prepare for them as if they are going to happen and work to reduce your vulnerability. 

Use the “Threat, Vulnerability and Magnitude” (TVM) framework to mitigate risks: 

• “Threat” – The threat dimension reflects the likelihood of an adverse event – a cyberattack, for example.
• “Vulnerability” – Vulnerability refers to the likelihood that an event will cause adverse effects – for instance, the hackers’ attack succeeds.
• “Magnitude” – Magnitude refers to the potential costs you could incur due to an adverse event. 

Be honest when assessing threats. Denial prevents companies from acting on urgent issues promptly. In the article “Corporate Purpose: Shifting from Why to How,” McKinsey’s Arne Gast and his co-authors explain that purpose-driven companies often possess a greater awareness of changing external expectations, industry standards and policy directions, which helps them spot risks earlier. Threat awareness, paired with an authentic value-centered framework, will also help you launch a fast, coordinated response that meets stakeholders’ approval and reduces the magnitude of the risks involved.

When you show employees that they’re your most important asset by embracing a values-based perspective, you’ll enjoy several benefits:

• Filling positions more quickly – Companies that struggle to fill roles lose value. After all, you can’t make sales without a salesperson. You’ll attract suitable candidates more quickly if your company values align with theirs.
• Attracting better workers – The best workers are purpose-driven and believe their jobs should align with the values central to their identity.
• Employee retention – When you demonstrate your values through employee benefits, such as good health insurance, you’ll likely find it easier to retain your best workers.
• Employee trust – Research from EY shows that for two-fifths of people, a demonstrated commitment to diversity (through recruiting, retaining and promoting workers from diverse backgrounds) is a “very important” component of trust. Over half of respondents believed that a company must operate ethically and proactively offer “equal opportunity for pay and promotion for all people regardless of difference.”
• Job satisfaction – Employees who feel they’re contributing to a purpose-driven organization whose work benefits the world are more satisfied in their roles. 

Avoid “values washing,” which means falsely advertising values you believe will resonate with your desired customers without actually putting them into practice. To sidestep this temptation, commit to integrating your values across every level of your business. Likewise, hire people who align with your values; they will help hold your company accountable. 

Take the following four steps to integrate your values throughout your business:

1. Clarify your values – Discuss your values both internally and externally, helping employees and potential recruits understand the impact you hope to make on the world.
2. Assess your actions – Reflect on whether your company is putting its values into practice. For example, if you advertise values such as “fairness” and “equal opportunity,” do you proactively seek new hires with diverse backgrounds? Are your values integrated into your processes? For example, do you evaluate potential candidates’ applications without looking at information that may bias your hiring decisions? 
3. Track what works – Collect data on whether values-based initiatives achieve their goals and in what contexts so that you can make evidence-backed decisions.
4. Be transparent – Let people know which issues you hope to address, your challenges, and any steps you’re taking to align your business with your values.

In 2021, nearly two-thirds of employees in the United States said that the COVID-19 pandemic had prompted them to reflect on their purpose, and nearly half began reconsidering their line of work. Millennials, in particular, were three times as likely to reevaluate their professional lives. While the disruptions caused by the pandemic may have subsided, it’s unlikely that today’s workers will stop reflecting deeply on whether their careers align with their authentic purpose and values. People are more likely to follow a leader who reflects their values. If you’re a leader, aspire to model honest and ethical leadership practices and prosocial behavior in the workplace.

If you’re unsure of your values as a leader, reflect on what matters to you. Ask yourself, “What impacts me most emotionally?”; “What would I like others to say about me at my funeral?”; and “Where can I best focus my energy to build a better world?” Identify the values of people you currently lead and whether there are any crossover areas. Focus on those areas of alignment when attempting to engage more skeptical employees. After identifying the values you’d like to prioritize in your leadership role, model these behaviors and share your new values framework with others, giving them insight into how those values guide your decision-making. Be open to feedback from others and listen carefully to gain deeper insight into how to lead from a place of shared values.

Leverage the following three elements when putting values into practice:

1. “See more” – Assess submerged value and hidden risks and opportunities by embracing a values-based perspective that considers each facet of CORE.
2. “Do more” – Encourage your organization’s product development employees to build your values into your products and services. Likewise, support your risk management and operations teams in assessing and mitigating risks using a values lens.
3. “Say more” – Your marketing and communications should reflect your values. Aim to connect with customers based on shared values, differentiating yourself from the competition while using your values positioning to your advantage (“differentiation x awareness = advantage”).

Leading in accordance with your values will not distract you from achieving your financial goals – it will better position you to do so. When competing in an unstable and unpredictable market, embracing transparency and living authentically in alignment with your values will give your company the competitive edge it needs to stand out.

Daniel Aronson is the founder of Valutus, a company helping people create value through responsibility and sustainability.

1. amid: (prep) among or surrounded by things. Ex: He sat amid the trees.
2. pledges: (n) a serious promise or agreement, especially one made publicly or officially. 
3. fallacy: (n)  a false idea or belief. 
4. appeal to: (v) to be interesting or attractive. Ex: Such music managed to appeal to the tastes of both young and old.
5. evade: (v) to avoid talking about something, especially because you are trying to hide something. 
6. submerged: (v) to hide feelings, ideas, or opinions and make yourself stop thinking about them