Especially in uncertain times, businesses that act with transparency are doing their people, their profits and their customers a big favour. The case for character in business is not a difficult one to prove. Between 2016 and 2019, the volume of investment flowing into funds that had a strong focus on environmental or social matters increased from $8.1 trillion to $11.6 trillion in the U.S. alone. The demand for sustainable products and transparency in leadership has been consistently growing for years.
The benefit that a focus on values provides within the internal affairs of a business is that it provides a roadmap and compass for decision making. Without clear values to guide conduct and culture, it’s easy to lose our way, lose sight of the things that really count and subsequently lose the trust of those who matter most.
For this reason, referring to a values-centred framework for making decisions, from strategic to operational, is essential.
Back in the 1930s a Chicago businessman by the name of Herbert J Taylor embarked on an ambitious recovery plan for his ailing aluminium distribution business, Club Aluminum.
In an effort to stave off bankruptcy, Taylor believed a crucial first step was to develop a clear ethical framework for operating.
Taylor set out to develop an easy-to-memorize and simple-to-understand set of principles that would guide and influence the decisions and actions of everyone in his company. The end result was a four-question test that encapsulated the values of both Taylor personally and the company he had founded.
1. Is it the truth?
2. Is it fair to all concerned?
3. Will it build goodwill and better friendships?
4. Will it be beneficial to all concerned?
Almost immediately, Taylor’s ‘4-way test’ had an impact. The company re-wrote one of its advertising posters which declared that its product was “the best cookware in the world.” Taylor knew that the company could not prove that this was true and therefore the claim violated Question 1 in the test. The advertisement was rewritten to include only the facts.
In another instance, Club Aluminum awarded a contract to a local printer who had competitively tendered for the job. However, soon after the contract was awarded, the printer realized he had underestimated the quote by a relatively small amount. Although it would have been well within Club Aluminum’s legal rights to force the printer to fulfil his side of the contract, Taylor and his leadership went back to questions 2 and 3 of the 4-way test and decided to pay the additional amount in good faith.
Over time, Club Aluminum became known for its high ethical standards and Taylor’s 4-way test began to be adopted by other business leaders and organizations worldwide – most notably, Rotary International.
The motive for deviating from values is the belief that maintaining them will bring about the loss of profit, popularity and prestige. And in some cases, this is exactly what happens.
This was certainly the case for Debby Blakey who is CEO of Australian Superannuation (Pension) fund HESTA. In speaking with Debby recently, she shared an experience from a few years ago when she and her board decided to not make any new investments in the fossil fuel industry.
The business press was scathing. This move was seen as corporate activism and irresponsibility with many commentators arguing that the job of a super fund executive must be to maximise member’s investments – nothing more. Pushing back on this Friedman-esque paradigm, Blakey argued that HESTA could not be true to its stated mission of ‘creating meaningful change for generations to come’ while investing in industries that were robbing the next generation.
In a similar more recent move, Australia’s largest superannuation fund AustralianSuper announced that they would be ramping up their focus on investing with environmental, social and governance issues front of mind. AustralianSuper’s chair Heather Ridout has hit back at criticism of the move claiming “We’re not activists, we’re engagers. We ask them their issues and discuss them together, in the end it’s for the boards of those companies whether they want to take the views of our fund or not. Community expectations are very important, and I don’t see why they are diametrically opposed to shareholders.”
While holding fast to values does, in reality, run the risk of losing profit, popularity and prestige, it consistently proves itself to pay off in the long run. Just as is proved in political elections and the like, nothing violates the trust of supporters, voters or customers more than deviating from values. By the same taken, nothing wins the trust of customers more than integrity, especially in a time as unpredictable as this.
How would your business do if it was to go through the 4-ways test? Would it hold fast to values even at the risk of loss? How are values valued in your company, work and leadership?
Michael McQueen is a trends forecaster, business strategist and award-winning conference speaker.
He features regularly as a commentator on TV and radio and is a bestselling author of 8 books. To order Michael's latest book "The Case for Character", click here.
 Yeates, C. 2019, ‘We’re Not Activists’: Australiansuper’s Heather Ridout Hits Back’, The Sydney Morning Herald, 6 March.