Putting Your Value System to Work John McVea, Ph.D., and Laura Dunham, Ph.D. April 26, 2013 Inspiring commitment from others to an idea or a dream that barely exists is one of the central entrepreneurial tasks. How better to achieve this, when resources are slim and uncertainty high, than to rely on the guidance of the personal values forged in our youth? As we have seen many times in our research, it is not just a relentless focus on value creation that allows entrepreneurs to bring new products and services to market; it is also a reliance on personal values (what is important, what is not, what must be done, what must not, why efforts must be made, how tasks should be carried out) and acting as an authentic embodiment of these values that enable entrepreneurs to inspire the commitment of others. This, in turn, allows them to secure the resources they need to bring innovations to market and to create organizations that – years after the departure of the entrepreneurs – continue to bear the stamp of the founders’ values in the form of organizational culture. When Kieran Folliard was planning to enter the crowded and notoriously fickle bar and restaurant business in downtown Minneapolis, he knew exactly what he wanted to create. He wanted to develop a landmark, beautiful and handcrafted building, reminiscent of the grand 18th-century public houses of the Dublin he remembered from his youth. Of course he spent time raising finance, arranging suppliers, hiring staff and developing budgets, but his heart – and most of his days – were invested in sitting at a dusty desk in the middle of the construction site working with local wood carvers and artisans to try to create a thing of beauty that would last 100 years. Would his customers even notice that this section was handcarved or the stained glass handmade? “I didn’t do any customer research,” he said. “At the end of the day, you’re doing it so that you can be proud of what you’re doing, for the authenticity, for yourself and, hopefully, for the people who work and frequent the establishments. I can still hear my father’s voice saying, ‘If you don’t want to do it right, don’t do it at all.’ It’s important for me to try to create beautiful things that last and that is why I focused on the craft and the design of The Local.” The importance of aesthetic beauty became a central theme of what is today the Cara Irish Pubs Group. When Howard Schultz began developing the concept that became Starbucks, he knew that he needed to look beyond more efficient execution of the existing model of the American café. While he initially was inspired by the café culture of Italy, much of the unique and high-quality experience he sought to craft was developed through a collaborative approach with his employees, many of whom were used to a more transactional relationship with their retail employers. Guided by values of respect and fairness, even in a low-pay environment, Schultz departed significantly from retail norms by offering his employees extensive training and education, health benefits and stock options. Why did Schultz take this approach? Because he had researched the power of intrinsic motivation? Or because he had benchmarked such practices in other industries? No. The reason he developed a unique approach to managing hourly workers goes back to the values he learned in his youth. Schultz grew up in a stable lower-middleclass home in the 1950s; however, that all changed the day his father fell and broke his ankle. His father had neither health insurance nor workers’ compensation when he got hurt on the job. With no financial support, the fragile middle-class environment crumbled. His father could not work, could no longer put food on the table and, worse, eventually lost his confidence and esteem. “He was beaten down; he wasn’t respected,” Schultz said. Schultz recalled that after this incident, he vowed to put an end to that vulnerability if he ever owned his own company: “I wanted to try and build the company that my father never got a chance to work for.” Today, Starbucks has one of the lowest rates of employee turnover in the industry and is regularly one of Fortune Magazine’s “100 Best Companies to Work For.” What became critical differentiators began as personal, normative values, rooted in his own experiences as a young boy. The ‘Four Goods of Entrepreneurship’ Most of us are guided through our personal lives by the values forged in our early years alongside parents, teachers, coaches and friends. In our professional lives, however, we often feel the pressure to hang many of those values on the coat hook on the way in to work each day, and to adopt the more generic and, often, aridly economic values of the institutions in which we work. In contrast, the entrepreneur has the opportunity, indeed necessity, to create from scratch a new organization and culture, along with unique and distinctive products or services and a new set of stakeholder relationships. As catalysts of all this activity, entrepreneurs both consciously and subconsciously use their own personal values, experiences and dreams to inspire others to believe in and commit to their entrepreneurial journey. We call this “weaving the web of belief,” where it is the personal values of the founder that inspire and bind together the initial resources of a venture, long before concrete financial or other extrinsic motivations come to fruition. One useful way to understand how personal values infuse and shape the entrepreneurial process is using a framework we have developed with Michael Naughton of St. Thomas’ Center for Catholic Studies, called “The Four Goods of Entrepreneurship.” 1. Products and services that are inherently good 2. Trading relationships that are good 3. Altruism that promotes the good 4. The development of good character and substantial leadership in the entrepreneurs themselves While it may seem obvious to say that most entrepreneurs are starting their business for good rather than “evil” purposes, at St. Thomas we go further in our belief that it should be the primary purpose of business to contribute to the greater good. This is very different from suggesting that we should only found businesses that solve world hunger or eliminate injustice. But it does mean that good entrepreneurial businesses should make the world better rather than worse. “The Four Goods of Entrepreneurship” framework identifies how the entrepreneur’s values can contribute to the greater good in many more ways than by simply determining the best destination for a year-end altruistic contribution. Philanthropy is good, but it is not the only source of good in an entrepreneurial venture and sometimes it is not even the best source of good. A case in point is Kate Herzog ’10 M.B.A. and her growing venture, House of Talents [profiled in B., spring 2010]. Like Folliard, Herzog has a love of beautiful things that harken back to her childhood, in this case, in Ghana; thus, her initial idea was to link talented artisans from Africa with consumers in developed markets. But Herzog also wanted her business to serve as a vehicle for economic development. She remembered feeling as a child that charitable aid took little account of the personal hopes and dreams of the people it was trying to help. So her goal was not simply to import good products but also to develop relationships with her suppliers that allowed them to gain financial independence so that “those artisans could construct the lives they envision for themselves.” She worked closely with her suppliers, providing feedback and mentoring that helped them refine and strengthen the design and quality of their products. She committed not only to paying them a fair price, but also providing them with a 50-percent advance with each order to enable them to access needed resources without having to turn to exploitative local money lenders. In addition to the entrepreneurial goods created through her product and trading relationships, Herzog also actively gave back; however, even her altruistic acts were laden with her personal values of respect and dignity toward the poor. Instead of cash or aid, House of Talents donated useful equipment that helped the artisans build on their successes: laptops, digital cameras, welding glasses and a bicycle, within the first two years. Entrepreneurial Values In the Opus College of Business Entrepreneurship program, we give our students the opportunity to consider the role of their own personal values as they ask themselves a critical question, “What sort of an entrepreneur do I want to be?” One vehicle we use to generate these discussions is case-study analysis. Over the past five years, with support from the Ron Fowler Case Study Awards, we have developed a collection of local case studies of entrepreneurs, many of whom are alumni from our program. We do not start these case studies with the founding of the business. In order to fully understand the strategic direction of the business, we first have to understand the lives of the entrepreneurs up to that point: What is important to them? What is not? How would they define success or failure? What are they trying to achieve? What are their strengths and weaknesses? How do they make decisions? What do they value? Only by asking these questions can we start to understand the complex situation facing the entrepreneur and make effective decisions. Thus, our students learn not just the importance of business technique but also the importance of thinking through their own personal values and experiences to determine how they might structure their businesses around what is actually important to them. Another important vehicle for exploring how their values shape the entrepreneurial process is the Lemonade Stand Project. In our introductory Entrepreneurship class, professors Jay Ebben, Ph.D., and Alec Johnson, Ph.D., have created a course centered on a “build it from scratch” project, which requires students to develop their own concepts and bring them to market within one semester and with only the resources that they can beg or borrow. Given these constraints, students quickly come to understand the importance of their own experiences and values in driving insights about new ways to create value in the market. In the most recent semester, one group created a venture called Love Your Melon to promote awareness of children’s cancer: For every hat sold, another was donated to a child undergoing cancer treatment. The source of the idea came from one student’s own experience with a family member suffering from the disease. Other students have used, for example, a personal love of art to develop graphic business ideas, love of music to develop auditioning software, and belief in the character building power of sports to develop youth mentoring proposals. Like Herzog, the students have created more than just good creative products and services. Through teamwork, and desperation (Ebben and Johnson push them pretty hard!), strong relationships of trust, friendship and community emerge. And, perhaps most importantly, the Lemonade Stand Project illustrates again the development, deepening and enriching of the character of the actual entrepreneurs themselves. Not only can these young entrepreneurs make the world a little bit better, but in trying to do so they can transform themselves, becoming more capable, more connected, more confident and more community oriented. As one student said, “In just a few months, I think I have evolved completely and grown as a person, not only in business knowledge but also in confidence, in knowing what I can actually do.” In the words of another, “If we are able to take this one idea in a matter of one semester and get it to market and affect thousands of children’s lives, think of what we can do with more than two or three months.” In sum, we believe that personal values and value creation are tightly intertwined and mutually reinforcing. Through an understanding and expression of their personal values, entrepreneurs can create multiple sources of good. And along the way, their entrepreneurial journeys can lead them to a deeper understanding of what they truly value. As one of our new students recently put it when reflecting on his experience in the Lemonade Stand Project, “I learned that if I choose my responsibilities and recognize that I am representing St. Thomas, my class, my family, and if I choose to let them show themselves in the way I do my business, I can take pride in everything I am doing. And there is something beautiful in that.” Read more from B. Magazine.