The first company meeting of the new year, in January of 2016, was unlike any meeting we had ever had at D.R. Wastchak, LLC (DRW).

Things had changed, and were going to be changing even more over the next year and beyond.

I had just finished a yearlong effort to sell the company, but realized in the end that DRW was not saleable, at least not for a price I was willing to accept and offers that would allow me to truly walk away and be free to pursue other personal and professional interests.

If others were not going to provide me with greater freedom, then I would make it happen for myself, and DRW was the vehicle to make that possible.

The message to the DRW team that January was different... new... and I believe refreshing.

I told my team that they could work anywhere, putting in hours for many employers, doing a job, but that was no longer good enough for me.

I wanted the work they did at DRW to be truly meaningful to them, and for each of them to leave DRW "better people" after having been a part of our team.

The picture I painted of a bigger, brighter future, my level of enthusiasm, and the sincerity of my message clearly caused some excitement in the meeting, but there was also sadness and a few tears.

In the room were all the same employees who had been with the company in December, and many for the past five or more Decembers, but not everyone in the room was going to be a part of DRW's transformation to the bigger, brighter future.

By the end of the year, some members of the team would be gone, most by their own choosing, and a few because I asked them to leave. There would also be many new faces.

While those leaving and those who would be new was yet unknown, one departure was known and announced at the meeting.

The person who had been my right-hand-man/woman for the past ten years was leaving.

Unfortunately, it had become clear to me, as much as I wished and hoped otherwise, that she was not going to align with the new direction and core values of DRW.

So with great sadness, in late December, I told her she would not be able to continue on the next leg of my journey with DRW.

One of the hardest decisions I ever made as an entrepreneur, but essential to creating greater cohesion, buy-in, alignment, and excitement in every member of the team.

Key Ingredients for a Bigger, Brighter Future

My previous articles on "Winning the Great Resignation" and "Navigating the Demographic Drought" talk a lot about the importance of looking beyond compensation to attract and retain workers for your team.

This was particularly important to my company because, as I've explained before, my business did not have high gross revenues to lavish on employee compensation. We had to rely on other factors to attract, hire and retain employees.

Prior to 2016, the "old DRW" relied heavily on creating a positive culture, which was based on little more than what I thought was "positive".

We went out of our way to show appreciation and respect for employees, recognized good performance, and organized fun team building activities outside of work.

In the "new DRW", we were much, much more deliberate about building a positive culture, focusing heavily on two key ingredients: core values and vision.

To be clear, "core values" are the essence of a business' culture, what it stands for and believes in, it's purpose for existing.

Little did I know at the time that I wasn't alone.

A study by Oxford University and Ernst and Young "found that public dialog on purpose had increased five-fold between 1995 and 2016."

"Purpose", according to a 2018 study, titled "Corporate Purpose and Financial Performance", focuses employees on a concrete goal or objective "beyond profit-maximization", which, of course, is exactly what I made the most of, absent lots of dollars to recruit and retain employees.

Furthermore, "An organization’s purpose is not a formal announcement, but instead a set of common beliefs that are held by and guide the actions of employees."

As it turns out, this same study provides an explanation for why the old DRW realized only moderate success with a focus on purpose, but the new DRW found much greater success.

First, let's look a little closer at the role "purpose", represented by core values, plays in the corporate world, which is reasonably analogous to smaller, main street businesses (valued at $2 million or less).

Source:  "The Value of Corporate Culture"
 

The Most Popular Core Values

A 2012 study published in the Journal of Financial Economics, titled "The Value of Corporate Culture" , evaluated all 500 companies of the Fortune 500 to determine how many core values they shared with ("advertised" to) the public.

The chart above presents their findings, with the data showing a median number of five (5) and an average number of four (4) core values advertised per company.

The chart below lists the nine common core values amongst the companies, as well as the frequency each value was advertised on their website.

As you can imagine, it would be quite something if all 500 companies subscribed to only nine core values, which of course they don't. The nine core values represent a broad grouping of more or less similar values advertised on the website of each company.

The most popular value was "Innovation", advertised on 80% of company websites, followed by "Integrity" and "Respect", both advertised on 70% of company websites.

Source:  "The Value of Corporate Culture"
 

The Core Values Advantage

"The Value of Corporate Culture" study noted three distinct advantages to elevating a standard operating principle of an organization to the level of a "core value".

First, when a principle, like "innovation" for example, is elevated to a core value, it becomes clear to everyone in the organization that this value "needs to be respected at all times, not a goal that is traded off against other goals."

Second, "by advertising it as a company's value, a firm is more likely to attract and retain people who share this value or—at the very minimum—have a lower cost to live and operate by this value."

Finally, promoting innovation as a value "facilitates its establishment as a [social] norm inside" the business.

On this last advantage, they note, "for a social norm to be enforced, it must be shared by most people in a community. In particular, in a [business] it must be shared and followed by who is at the top. This is really a case of 'lead by example'".

This is exactly what I did at DRW (both old and new), and I emphasize as critically important to all those wishing to be truly Freedom Focused. 

Business owner(s) must walk the talk, and sincerely live and exhibit all of the core values of the business.

In short, they must exhibit the core value of "integrity" in all that they do, not just "advertise" the value on their website.

Doing anything less calls into question, in the minds of employees, all the core values. Evaporating every advantage core values provides.

"The Value of Corporate Culture" study proves as much, finding that, "Integrity is positively correlated with financial performance and attractiveness of job offerings." 

Do Core Values Really Matter?

The answer:  It depends... 

"The Value of Corporate Culture" study found "very little evidence that advertised values are correlated with performance," i.e. not profitability on the positive side, nor with "the frequency of class action law suites", on the negative side.

The "Corporate Purpose and Financial Performance" study found similar results, with no correlation between the strength of employee beliefs in purpose and performance outcomes, e.g. operating return on assets.

However, the Corporate Purpose study did discover "superior accounting and stock performance" when utilizing data from the Great Place to Work Institute.

Great Place to Work (GPTW) provides an employee survey tool, and recognition program, for employers to evaluate and gain feedback on workplace culture.

The Corporate Purpose study utilized GPTW data "from 456,666 employees across 429 firms and six years across a broad range of industries."

The GPTW employee survey data allowed researchers to look beyond what companies claimed as core values on their website to what employees believed the true values of the organization were.

Companies in the data set were segregated first into those with a "strong purpose", i.e. "those in which employees in aggregate have a strong sense of the meaningfulness and collective impact of their work", and those without this sense.

A strong sense of purpose was characterized by statements like:

“My work has special meaning: this is not just a job.”
“I feel good about the ways we contribute to the community.”
“When I look at what we accomplish, I feel a sense of pride.”
“I'm proud to tell others I work here.”

However, a strong senses of purpose alone wasn't enough to produce "superior performance".

When the researchers further segregated the companies with "strong purpose" into two more groups, the positive benefits of core values were revealed.

Purpose, Camaraderie, and Clarity

The "Corporate Purpose and Financial Performance" study refined the Great Place to Work data into two subgroups of companies with "strong purpose":  high Purpose-Camaraderie organizations and high Purpose-Clarity organizations.

Purpose-Camaraderie

The employees of these organizations scored their company high on questions like:

“This is a fun place to work.”
“We are all in this together.”
“There is a family or team feeling here.”

While these companies obviously have a strong sense of teamwork and have fun, the data doesn't show these core values to have a positive impact on accounting and stock performance.

Purpose-Clarity

The employees of these organizations score their company high on dimensions of management clarity, with positive responses to questions like: 

“Management makes its expectations clear.”
“Management has a clear view of where the organization is going and how to get there.”

For businesses that exhibit both strong purpose and management clarity, the data does show "superior accounting and stock performance", with calculated average stock returns in the future up to 7.6% higher than other firms in the data set.

Of particular importance is a finding that middle-managers and salaried professionals are the most important drivers of this positive correlation, while data shows no positive correlation with senior executives, the sales team and hourly workers.

Core Values + Vision = Superior Performance

It's clear to me now that for the first fifteen years I was in business, I was creating a very strong sense of purpose for my team at the "old DRW".

What was lacking, and what clearly made a difference with the "new DRW", is not only a more deliberate focus on identifying and living by core values, but also "clarity" for my team.

Not until 2016 did we "discover" our core values and integrate them into every aspect of how we operated, making them "social norms" that every member of the team followed, from me as the owner to the inspectors in the field.

Not until 2016 did we focus on "clarifying" our vision for the future, establishing clear 3-year, 1-year and quarterly goals around this vision, tracking Key Performance Indicators (KPIs), and instituting a regular, structured employee review process. All things that provided significant clarity for my team.

The result?

I was finally able to sell the "new DRW", to three members of my Leadership Team, for a price I was willing to accept, and under terms that wold allow me to truly walk away and be free to pursue other personal and professional interests.

I wasn't following a magic formula. My freedom was won by doing exactly what research shows creates "superior performance": a strong purpose based on lived (not just advertised) core values + clarity around a well defined vision for the future.

Build your own Freedom Focused organization and you will create your own "Freedom to Exit", when you're ready, for maximum dollars, and on your own terms.

To make this possible for you and your business, you'll need to stay...

Focused on your freedom!

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