Developing Your Business Philosophy

Once you have defined your personal aspirations it’s time to discover how you can make your business fulfill those aspirations. This starts with your business philosophy — the system of guidance for your day-to-day business activities. Your business philosophy provides the guidelines to what is right, good, and moral in your business relationships.

A business philosophy shouldn’t be an afterthought. How you conduct business is just as important as the product or service you sell.

 

Purpose of a Business Philosophy

Your business philosophy defines the parameters of your business conduct; what you will and will not do. It establishes the right way for your entire company to do business. This is especially important if you have employees who base their behavior on principles that are different from yours. As a small business owner, you can’t afford to have your reputation compromised.

Although developing a business philosophy might sound unimportant when you have so many other things to do, it’s actually a competitive advantage that can have a significant impact on your business and business success.

For example, integrity and honesty aren’t just ethical business behaviors ⎯ they result in profits as well. How?

Integrity and honesty result in trust. Trust results in customers. Customers result in profit.

Strong business principles also earn you the trust and loyalty of employees, who feel valued and appreciated. Increased employee satisfaction results in increased productivity, loyalty, and quality of service, which in turn results in better value and happier customers. Customer satisfaction results in customer loyalty, which leads to profitability and growth.

Your guiding principles form the philosophical foundation on which all the changes in your future are built. They should be enduring principles that apply to all circumstances.

Guiding principles rarely change. They surpass individual or religious preference. A good test of the self-evident truth of a principle is to ask yourself what your company would be like with the opposite values. Can you imagine any successful organization built on principles of dishonesty, mediocrity, and unfairness? Values like honesty, excellence and fairness transcend time and circumstances.

 

 

All the strategic planning in the world won’t keep you in business if customers don’t trust you. Jacqueline Dunckel, in Good Ethics — Good Business, states, “What you can learn from history, both recent and past, is this: if you want to be successful in business on a long-term basis, you must match your operational expertise with an ethical code of conduct practiced in every phase of your business. No exceptions!” [Excerpt from Good Ethics — Good Business by Jacqueline Dunckel, 1st edition, ©1989 International Self-Counsel Press.]

An example of how honesty and integrity work can be seen in how people get their cars fixed. For most people, finding a reliable, honest mechanic is little more than guesswork. The problem is that most people have little or no knowledge of car repair and don’t know if they should pay $500 for a new transmission or $1,500. When they find a mechanic they trust, they become loyal, devoted customers. Even more, anytime someone they know has car problems and asks about a good mechanic, the devoted customer doesn’t hesitate to offer their mechanic’s name. There are many auto repair shops that don’t even bother advertising because customer loyalty and word-of-mouth bring them all the work they can handle.

When you think about your business philosophy, ask yourself questions like:

• What kind of business do I want to run?
• Does my business depend on my good reputation?
• What do I want customers to associate with my business?
• What values do I want my business to stand for?

 

Defining Your Company’s Core Values

Your business values should be an extension of your personal values. One of the great benefits of being a business owner is the opportunity to integrate your personal values into your business. In small businesses it’s especially important that the personal values of the owner relate to the business values. If not, unresolved tensions may undermine the success of the business.

When your employees understand your core values, they’re able to make better judgments. They can recognize plans or actions that will compromise the integrity of the company and say “no” to them. Defining core values for your company also helps create unity among diverse personalities and job functions. They provide continuity even when priorities or strategies change rapidly.

Earlier you were asked to think about how you personally want to be remembered. Now consider how you want your company to be known. What reputation do you want your company to have? For example, do you value your customers? If so, dealing honestly with them should be one of your core values. Commitment to customer satisfaction is another example of a core value.

Your overall business philosophy will be made up of various philosophy statements that relate directly to the core values you identify as important to your business.

Here are several examples of core values and corresponding philosophy statements:

 

Customer-Focused Values

• Customers are the core of our existence. We will succeed by serving the customer, not by serving ourselves.
• We will measure our success through customer satisfaction.
• We will hold the affairs of our customers in the strictest of confidence.

Integrity-Based Values

• Our objective is to be independent, honest, dignified, and law- and regulation-abiding at all times, with all people, without compromise, regardless of price.

Quality Service Values

• We will address only those assignments we can perform with complete confidence.

People-Oriented Values

• We will seek to attract, develop, and reward the best talent to ensure our employees’, our corporation’s, and our customers’ future success.
• We will offer a secure and expanding future for our employees by remaining a profitable, effective, financially sound company.

Action-Oriented Values

• We will foster a sense of urgency to all customer requests.
• We will foster an employee-empowered environment, encouraging employees to take responsibility for their actions and for the satisfaction of customers.

When you think about the individual philosophy statements that will make up the body of your business philosophy, consider all of the stakeholders in your company. Your core values should address the needs and interests of employees, customers, vendors, shareholders, and all other individuals or groups who have a stake in the success of your company.

Review the personal values you identified in Module 1, then determine what values you want as the basis of your business philosophy. You can then turn each value into a guiding philosophy statement.

 

Connections Between Values and Philosophy Statements

Value	Philosophy Statement
Integrity	We believe integrity is the cornerstone of all our business relationships; therefore, we will expect all of our employees to be honest and forthright with our customers, our vendors, and with all others whom they may contact in the name of the business.
Management	We believe management is the art of leading people to accomplish stated objectives; therefore, leadership qualities and demonstrated ability to accomplish objectives will be primary criteria by which we select and evaluate managers.
Planning	We believe planning is the art of preparing for change; therefore, we will use planning as a management tool to keep us prepared for those changes that must come.
Customers	We believe nothing happens until you make a sale, and sales are only made to customers; therefore, we will place the satisfaction of our customers above every other business consideration.
Employees	We believe well-trained, highly motivated employees are the most important means of serving our customers; therefore, we will select, train, and reward employees who place customer satisfaction first.
Profit	Our ability to properly service our customers depends on long-term profitability; therefore, we will manage our business to create a responsible return on assets.
Growth	We believe growth is a logical consequence for a well-managed company; therefore, we will evaluate management on the profitable, orderly, controlled growth the company sustains.
Community	We believe a profitable, growing business should, from its abundance, invest in the community that sustains it; therefore, we will individually and corporately invest in selected philanthropic activities of our community.

 

Back in the 80s, Johnson & Johnson proved just how seriously they took their corporate philosophy when seven people died from taking Extra-Strength Tylenol capsules that had been laced with cyanide. Johnson & Johnson didn’t waste valuable time trying to determine fault but took immediate action to prevent further deaths from occurring. With public safety as their primary concern, Johnson & Johnson issued a full recall of all Tylenol brand capsules, which cost the company close to $100 million. As it turned out, the tampering occurred outside the company, but Johnson & Johnson accepted full responsibility even before it knew who was truly responsible.

Johnson & Johnson’s response to this situation has been hailed as one of the best-handled corporate crises in history. Through its candor and sensitivity, Johnson & Johnson won respect from its customers, shareholders, and the media, and the Tylenol regained its market lead.

 

Johnson & Johnson Credo

Our Credo We believe our first responsibility is to the doctors, nurses and patients, to mothers and fathers and all others who use our products and services. In meeting their needs everything we do must be of high quality. We must constantly strive to reduce our costs in order to maintain reasonable prices. Customers’ orders must be serviced promptly and accurately. Our suppliers and distributors must have an opportunity to make a fair profit. We are responsible to our employees, the men and women who work with us throughout the world. Everyone must be considered as an individual. We must respect their dignity and recognize their merit. They must have a sense of security in their jobs. Compensation must be fair and adequate, and working conditions clean, orderly and safe. We must be mindful of ways to help our employees fulfill their family responsibilities. Employees must feel free to make suggestions and complaints. There must be equal opportunity for employment, development and advancement for those qualified. We must provide competent management, and their actions must be just and ethical. We are responsible to the communities in which we live and work and to the world community as well. We must be good citizens — support good works and charities and bear our fair share of taxes. We must encourage civic improvements and better health and education. We must maintain in good order the property we are privileged to use, protecting the environment and natural resources. Our final responsibility is to our stockholders. Business must make a sound profit. We must experiment with new ideas. Research must be carried on, innovative programs developed and mistakes paid for. New equipment must be purchased, new facilities provided and new products launched. Reserves must be created to provide for adverse times. When we operate according to these principles, the stockholders should realize a fair return.

TAKE ACTION!

Determine Your Core Business Values

Developing a Philosophy Statement

Your philosophy statement is based on your business’s core values and should guide the actions of the entire company. Once you have identified your core values, turn each value into a statement of your business philosophy in that area.

Once you have drafted your philosophy statement, present it to your employees for input and revision. It’s important for the entire company to get involved in the development process since everyone will be held accountable for the behaviors outlined in the final philosophy statement.

The philosophy statement should clearly spell out what employees will be held responsible for. It should help ensure your customers receive uniform, high-quality treatment. Employees need to know that they will be held to the values in the philosophy statement and that a breach of ethics will not be tolerated.

Be sure your final philosophy statement is easily understood and communicated. You may want to include it in your employee handbook or post it on plaques throughout your office. It doesn’t need to be formal, but each value needs to be clearly defined so there is no ambiguity about the meaning.

TAKE ACTION!

Develop Your Business Philosophy

Implementing Your Philosophy Statement

Implementing your philosophy statement begins with you. You are the one who must live it and set the example for others. Small businesses are a reflection of the personality and values of the business owner. Employees will follow where you lead. What you show as important to you becomes important to them.

If employees see you lie to a customer or vendor, they will assume that is acceptable behavior and not hesitate to imitate it — unless it goes against their personal value system. On the other hand, if an employee sees you deal honestly with a customer, even if it means risking a sale, that is the behavior they will imitate.

Once the philosophy statement is developed, it must be integrated into your business. Simply putting it on paper isn’t enough. Deciding how to implement the philosophy is as important as its development. It’s not enough to “hope” people will embody the new business philosophy. Change is hard and takes time. Those affected need to understand the purpose and benefits of the change.

Personal meetings with your employees are the best way to communicate a philosophy statement. If your employees were involved in the development process, implementation will be much easier since they already have “ownership” of the philosophy.

Once the philosophy statement is introduced, systems need to be developed that ensure the new behaviors defined in the statement are evident. For example, if your statement says that customer satisfaction is your highest priority, then you might implement a system that recognizes and rewards employees who provide excellent customer service. Your systems should support the behaviors and outcomes identified by your business philosophy and also discourage behavior that goes against your philosophy.

Keep in mind that some corporate actions can put pressure on employees to disregard your business philosophy. Be careful when you create incentive programs or set performance quotas. These may increase performance in the short-term, but if employees are ignoring corporate values to achieve immediate incentives, the overall program could hurt your company rather than help it. When implementing any motivational program, make sure adherence to corporate values is an integral part of the program.

Employee performance appraisals should include a section on how well they adhere to your business philosophy. What you pay attention to and evaluate will become important to your employees. Make sure your employee handbook spells out the consequences of disregarding the business philosophy.

 

Turning Aspirational Values into Actual Values

Once you have defined a list of values and associated philosophy statements, it may be helpful to go through a process of determining the degree to which each value is currently embraced within the daily life of your business. It is likely that there are some core values on your list that are “actual” and indigenous to your business—those that just naturally exist and flow out of real experience. And there might be some values that are important to you and your business but are not held as an “actual value” which is affecting the daily actions of everyone involved with your company. These might be called “aspirational values.” When you identify an aspirational value, it is often very enlightening for you to sit down with your leadership team to identify what alternate value is currently more held in place of the value you desire. As you identify the values that are being lived out in place of those to which you aspire, you may discover that there are many “unintentional values” that influence your business culture.

Following are some examples of unintentional values:

• All ideas will be measured by the phrase, “We’ve never done it that way before.”
• It is more important to win than it is to create mutual success.
• Our highest priority is to keep existing customers happy with our existing products.
• Compromising enough to please everyone is more important than accomplishing our vision.
• Doing what is most expedient or makes us the most money is more important than always doing the right thing.

 

It is not likely that anyone would intentionally develop values like this, but you may be surprised at what values have unintentionally crept into your business—values that actually guide discussions and decisions every week in your business and are counter to the values you want your business to be known for.

TAKE ACTION HERE. POSSIBLY TWO? “IDENTIFYING ACTUAL VALUES VS ASPIRATIONAL VALUES or “WALKING THE TALK?”

TAKE ACTION!

Identifying Actual Values vs. Aspirational Values