Why Values Matter To Founders and Entrepreneurs

Next wednesday, on September 20th, The Olin Business School at Washington University is hosting an important discussion on the importance of values and operating principles in entrepreneurship.

Estimated reading time: 4 minute(s)

Most startup founders are mission-driven: their entrepreneurial sense helps them identify a critical need no one’s thought to address, or a potential solution to a problem that no one’s considered . They’re on a mission, and that mission seems to encapsulate everything that they stand for, and by extension, what the company stands for.

From Casual Fridays to Keeping the Lights On

In the early days of being a founder, you likely have a clear vision of exactly the kind of company you want to run. You might imagine everything about it down to the last detail, from what office space environment your teams will collaborate in, to what kind of dress code policy will apply on “casual Fridays.”

However, facing the harsh realities of managing your own business can quickly tarnish that perfect vision you had, and make your mission less clear. The market response can undermine your resolve, and this prompts a greater, more threatening question to emerge. All too often, the question your venture seeks to answer goes from, “How do we make the world a better place?” to, “How do we keep the lights on?”

Deeply Meaningful Work

Stuart Bunderson, Professor in Organizational Ethics Professor Olin Business School at Washington University in St Louis has been researching the impact of values and mission statements on company performance. He has found that the commercial success is not always in skill and genius. Just as often, the secret is planting your flag in the ground from the very beginning and saying, “I stand for this [societal impact],” and sticking to what you believe in.

Olin Business School Professor in Organizational Ethics, Stuart Bunderson, At Washington University in St. Louis
“Many startup founders are driven by a sense of a higher calling that often is beyond simply the notion of making money,” said Bunderson, in a phone conversation with EQ. “And it turns out that deeply meaningful work that connects founders to a sense of societal purpose is actually a source of competitive advantage. Strong founding values really can drive success.”

Integrity or Bust

He cited the example of InfoSys, now a $10bn company, based Bengaluru, India. When Infosys was founded in 1981, they were entering an extremely competitive marketplace, as well as a political climate prone to corruption. It was actually fairly commonplace for new businesses to bribe government officials in exchange for an opportunity to pitch for lucrative contracts or avoid import taxes, for example.

However, one of InfoSys’s founding principles was to not engage in such behavior, and to take a stand against corruption. Initially, not giving or taking bribes put them at a significant disadvantage, but at the root of their values was a bigger vision that would push them beyond their competitors. They believed that India needed a tech company that was in lock-step with the modern world.

That single value turned out to be a strong competitive advantage with far-reaching consequences. Eliminating corruption created a far less risky environment for foreign companies looking to outsource parts of the IT operations to India. That gave InfoSys the opportunity it needed to become a critical driver of the nation’s future economic development. India’s IT sector currently captures roughly 67% of the $124B US market alone and is expected to generate over $350B per year by 2025, according to the India Brand Equity Foundation.

Unintended Consequences

Bunderson implores founders to, “pay attention to values early in the life of your company, as they can define it in irreversible ways.” That is to say that not bothering to define any values can have severe detrimental effects over the long term — your values define your company, and if you don’t take care to identify and foster good ones, you may not be happy with the effects they have on your company culture.

A case in point is Uber, which has been going through a major rethink of its corporate values this summer. Core operational tenets are being challenged by powerful company board members such as Arianna Huffington. “Many of Uber’s 14 cultural values, while well-intended, had been allowed to be weaponized,” Huffington said in a statement.

That’s because poorly formulated, but highly regarded values such as, “Let Builders Build,” “Always Be Hustlin’,” “Meritocracy,” “Toe-Stepping,” and “Principled Confrontation,” have been “used to justify poor behavior,” according to Huffington. Even the naming of conference rooms has changed from the War Room to the Peace Room.

In contrast to the strongly defined and practical values of InfoSys, the vaguely defined and non-specific values of Uber have had far-reaching consequences, too — just that of a different polarity, one that has seen the CEO ousted from the company he founded and 15% wiped off the valuation of the company.

Think Ahead

The real insight to be taken from these two examples is that values unavoidably emerge within any group. It’s better to consciously lay the foundation now than have it unintentionally and irreversibly define your company culture later. Founding values all have significant impacts on the long-term health and competitive selling points of the business.

“The thing about valuing values,” continued Bunderson, “is that ultimately they will help you navigate uncharted waters as a founder or entrepreneur. Strong values will help define how your company responds to pressure, say it if can’t make payroll, or how it treats its customers, or cares for employees. For many early-stage founders, these ideas may seem too far ahead to think about, but the truth is that if values are not clearly articulated and firmly defended from a venture’s earliest days, founders have little chance of creating companies that embody their most deeply-held values.”

To be part of conversation about what kind of company you want to create, join the The Olin Business School at Washington University event next week.

The seminar, “The Value of Values for Founders and Entrepreneurs,” will take place on September 20, 4-6pm, Emerson Auditorium in Knight Hall. The event is part of their and Values and Leadership Series and is presented in partnership with Entrepreneurs’ Organization (EO), Bauer Leadership Center and Washington University’s Executive MBA program.