by John Mackey and Raj Sisodia
Ed Freeman and Ellen Auster have written the definitive guide to thinking about and implementing a values-based approach to business. They provide a wealth of compelling examples and offer very practical frameworks for companies to successfully navigate this rocky terrain.
As longtime proponents of conscious capitalism, we strongly believe that values are foundational for companies looking to embody a more conscious way of doing business. Values inform a company's purpose, which is one of the four key tenets of conscious capitalism, along with stakeholder integration, conscious leadership, and conscious culture. The collection of values that are core to a company compose its culture. The values of the company's leaders must be in harmony with the espoused values of the organization, which have to resonate with all stakeholders-so getting values right is essential to the practice of conscious capitalism. This book will go a long way in helping people think logically and comprehensively about values.
Shared values are a precursor to creating "shared value," which is another way that people are starting to think about the evolution of business. At Whole Foods Market, we think of our core values as the guiding principles that we can use to realize our purpose. Our core values are very real to us; we share them with all of our stakeholders and continuously are in dialogue about them. The core values are: selling the highest-quality natural and organic products available, satisfying and delighting our customers, supporting team member happiness and excellence, creating wealth through profits and growth, caring about our communities and the environment, creating ongoing win-win partnerships with our suppliers, and promoting the health of our stakeholders through healthy-eating education.
Core values are essential in helping leaders deal with dilemmas where they have to choose between multiple courses of action that each seems right from a certain perspective. In such cases, leaders can use a company's core values to make choices that are maximally beneficial to all stakeholders. Instead of simply choosing one approach over another, we strive to come up with a creative solution that can simultaneously fulfill multiple values.
For example, Whole Foods Market sells a full range of animal-based foods because 95 percent of our customers eat these foods. At the same time, we have a commitment to improving the health and longevity of our customers and to improving animal welfare. We need to reconcile satisfying and delighting our customers while also helping them be as healthy as possible. Research shows that reducing the consumption of animal-based foods is a key aspect of improving health. Our approach is to educate our customers about the benefits of eating minimally processed and unrefined plant foods while also working to provide them with the healthiest possible animal-based products and ensuring that those animals are humanely treated. This approach has allowed us to remain true to our values while also remaining viable as a business.
The real test of a company's commitment to its stated values comes when it faces an existential threat. If a company can hold steady and not sacrifice its core values under such conditions, it augurs well for its ability to thrive in the long run. For example, Southwest Air-lines-a highly conscious business-has famously stayed loyal to its employees through numerous downturns in the airline market; it has never laid off any employees in its history.
During the great recession of 2008-2009, many companies faced extremely tough conditions and had to make difficult decisions. Truly conscious companies rededicate themselves to their core values in such times, enabling them to survive with their culture strengthened and their humanity intact. One example is a company called Barry-Wehmiller, a $2 billion privately held industrial machinery manufacturer based in St. Louis, Missouri. When the downturn hit, new orders for capital equipment virtually dried up. The company hoped it could get by on its backlog of orders as well as its aftermarket parts and services business. Soon, however, customers started to cancel existing orders, walking away from multimillion-dollar commitments. The situation was dire, and the board of directors was recommending that the company start looking at layoffs. CEO Bob Chapman, however, was guided by the opening line in the company's vision and values document, called its Guiding Principles of Leadership: We measure success by the way we touch the lives of people.
This document was deeply meaningful to everyone in the company and had been a touchstone for decision making since it was formulated six years earlier. Every major decision was looked at through the lens of the impact that it would have on all the lives that the company touched. As Chapman thought about the consequences of laying off a significant proportion of his workforce, he decided that he simply could not do that and remain true to the company's highest values. In that economic environment, there were simply no manufacturing jobs to be had. Numerous families would lose their homes, their children would have to be pulled out of college, and marriages might crumble. Bob thought, How would a caring family respond to this kind of crisis? The answer came to him: the family would pull together, and everyone would make sacrifices so that no one family member had to suffer excessively.
He came up with the creative idea of instituting a furlough: everyone in the company would take an average of one month off without pay. The company froze contributions to the 401(k) plan, lowered some executive salaries, and cut back on expenses such as travel. This enabled the company to save enough money to stay in compliance with its banking covenants and ensure that no layoffs were needed. The action resulted in an outpouring of goodwill, even altruism; some employees offered to take additional time off so that their colleagues who could not afford to take a month off could take less. By the time the recession ended, the culture had been strengthened and morale was higher than ever. The company's business recovered far ahead of the industry, and it gained significant market share, as it had experienced staff ready to work while other firms were scrambling to rehire people.
One of the powerful tools that is presented in this book is the idea of values through conversation. Barry-Wehmiller uses a version of this approach that it refers to as "mind the gap." After a team of people from across the company had drafted the Guiding Principles of Leadership, leaders across the organization sat down with small groups and shared the document with them. The leaders said, "These are the values that we say we live by. Please tell us where we are falling short." This resulted in numerous instances in which team members pointed out policies and practices that were inconsistent with the Guiding Principles of Leadership. The company immediately changed each of those policies. Over time such gaps virtually disappeared, and the company now has a remarkable level of consistency in being true to all of its stated values.
The values that a company chooses to live by can also be thought of as virtues. Just as all of us as individuals should strive to embody the essential human virtues, our organizations too should reflect them. But until now this has seemed an impossibly complex undertaking. This book helps resolve that complexity and enables organizations of any size to implement a values-centered approach to business. This in turn will spawn many more conscious businesses in the world, which will contribute greatly to human flourishing. We commend and thank Ed and Ellen for this valuable contribution.
