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Principles: What they are and why they’re important

Your principles are the values that guide your behaviour as a person—and as a brand. For most of us, these principles remain undefined unless we are forced to think about them. They are a result of our upbringing and life experiences, and are therefore invisible to us, like water is to fish. But they are easily revealed by our behaviour.

The principles of most companies are very generic and typically high-minded, vaguely defined concepts like honesty, integrity, respect and fairness. While these are all important, they should be considered table stakes. Nothing about these principles adds to your uniqueness as a brand. One should reasonably expect that any company they are dealing with is honest, respectful and fair, and does what it says it will do.

Why does a company need principles?

Essentially, your principles are meant to describe how you relate to people—whether they are customers, employees, stakeholders or the broader community. They describe how you will behave from a human perspective. And since a corporation is considered a “person” in the eyes of the law, companies should be required to define how that “person” intends to behave toward the people who work there, buy their products and have to live in the communities directly impacted by their business.

Principles must be clearly defined

Principles are often established, posted on the company website and forgotten. Along with vision and mission, they have become somewhat cliché. Consumers have become cynical about them, probably because companies’ principles are so often contradicted by their actual behaviour.

Because principles are “soft” concepts that are impossible to quantify, companies are often uncomfortable with talking about them. This is understandable. Business tends to celebrate stereotypically masculine tropes such as competitiveness, grit, decisiveness, agility and toughness. But principles often speak to human vulnerability—and showing any kind of vulnerability is anathema to most businesses. That’s why principles tend to be so vaguely and broadly defined.

Things are changing in this regard. These days, brands are scrambling to embrace a cause. Corporations are seen by some as ruthlessly profit-driven organizations that don’t really care about “externalities”—the social and environmental costs of conducting business—because they aren’t a line item on the balance sheet. But those externalities are realities for everyone outside the organization.

The cost of not living your principles

There is a cost to defining and living your core principles. Here is a set of principles for one of the world’s biggest manufacturers.

  • Integrity: We always strive to do the right thing.
  • Servants’ attitude: We only exist to serve our internal and external customers, so their concerns are always at the forefront of our business.
  • Accountability
  • Continuous improvement
  • Teamwork
  • Fun

Does this sound like a company that perpetrated one of the biggest frauds in corporate history? A company whose executives gamed environmental laws by embedding a device in the exhaust system of their vehicles that would make them appear to be within legal emissions tolerances? A company whose vehicles emitted 35 times the acceptable levels of nitrogen oxide into the air for years before it was found out? By now you know who and what we are talking about: Volkswagen, one of the world’s most trusted brands, and the Dieselgate scandal.

The cost to Volkswagen? In a matter of days, it lost a third of its market cap (about $33 billion). It faced US$18 billion in potential fines. It issued a profit warning, setting aside $7.27 billion to “cover the necessary service measures and other efforts to win back the trust of our customers,” meaning the 11 million VW owners who would experience an average US$1,500 drop in the resale value of their vehicles.

The “trust of our customers” is what branding is all about. The cost to Volkswagen for doing the complete opposite of what its principles stated was not only financial, but it also took an incalculable toll on consumers’ perception of the brand. It will be interesting to see how long it takes the company to win back the trust.

The moral of the story is that you can’t just articulate your principles: You have to live them. Every company makes decisions that sometimes contradict its principles; it’s how the company acts in response to that deviation that either destroys or builds trust. For an example of how to do it right, just look at the Tylenol scandal of the ’80s.

The other moral of the story is to be authentic. As New York Times best-selling author Patrick Lencioni said in the Harvard Business Review back in 2002, if you’re not willing to accept the pain real principles may inflict, don’t bother going to the trouble of formulating any. You’ll be better off without them.

Exercise: How to define your principles

Begin with a group of five or six individuals from the leadership team. If you are a startup with only five or six people, then you can obviously invite the whole company.

Some people precede the heavy lifting of defining principles with a bonding or team-building experience. This could be done at an offsite location, where you can engage in outdoor activities, or at your office, where you can engage in something more urban.

Get everyone together in a quiet place or room (or in the middle of the woods—wherever you happen to be bonding) to begin the process. Consider this a discussion or series of discussions, beginning with these questions:

  • What brought us together as a company in the first place?
  • What helps guide us through difficult situations?
  • What do we like about our culture here?
  • What do we like about the way we do things?
  • What is important to us?
  • What are we proud of?

In discussing each of your answers, your goal is to isolate ideas or words that resonate and record them on a whiteboard or sticky notes. When these questions have all been discussed and the key words and ideas collected, take a break.

When you reconvene, review the key words and ideas, and decide what to keep or put aside. Look for overlapping ideas and refine how each one is articulated by asking the following questions.

  • Is this principle something we’ll always believe?
  • Would we fire or hire on the basis of this principle?
  • Would we turn down business on the basis of this principle?
  • Can we use this principle as a guide in all company activities and functions?

If you have more than five or six employees, think about sharing the output with the rest of the company for their comments.

A week later, get back together to review the list and employee input. Ask the same questions if you need to. Make sure you are happy with where you’ve landed. You should have no more than five principles in the end— any more will be too hard to remember or manage.

Read more in this series

Read more about the 6Ps of branding, including: