Contributed by Aaron Fairchild, CEO of Green Canopy Inc.

According to 2013 research published by Luigi Guiso, Paolo Sapienza and Luigi Zingales, The Value of Corporate Culture, 85% of S&P 500 companies have at least one section of their website dedicated to -- what they call -- “corporate culture” i.e. principals and values that should inform the behavior of the firm’s employees. Values are important to promote and advertise on corporate websites and reports, because it is imperative for companies to manage their image. External stakeholders expect companies to have thought about their values and publicly acknowledge them. The act of creating and promoting values can help assure external and internal stakeholders that the company has a higher degree of integrity and is guided to conduct their business in a way that is consistent with and based on their stated values. 

Start with Intention

I recently spoke with the CEO of a publicly traded bank who was extremely proud of his employees for going through the process to create and document their values. They were, “developed by a group of really passionate employees that love this organization and only want the best for the bank, our employees and our customers.” Their guiding philosophy relating to their values are stated as, “Our Core Values encourage us to act in a manner that “wows” others and provide us with the opportunity to guide our actions that allow us to become who we want to be. We take pride in our Core Values and strive to live them each day.” This is an example that provides insight into great intentions and proactive leadership. However, when I asked him, “What does the bank do to ‘strive to live them each day’?” he floundered. Wasn’t it enough to go through the process to create their values and then promote them both externally and internally?

Learn from Employee Perception

This is a great place to start. But organizations that want to leverage the power of corporate culture to increase productivity and returns need to do more. 

The Guiso, et al. study also uncovered some additional, interesting facts regarding advertised values. Notably, the value most commonly exploited by the S&P 500 companies was “Innovation” followed by “Integrity” and “Respect”. When the researchers attempted “…to correlate the frequency and prominence of these values to measures of short and long term performance,” they “...fail[ed] to find any significant correlation.” Basically they found that advertised values are not a great indicator of corporate and employee performance. Perhaps that is because it is easy to state your values, so everyone does. 

Another point to note in the research is the concept of perceived value. The study found that if the employees of the company perceive management to have a high level of integrity, there was a positive correlation, and good outcomes in terms of higher productivity, profitability, and the ability of the company to attract talent. In other words it isn’t enough to create and promote values, they had to be perceived and held within the employee base of the organization.

Living Values

So how do we know if a company’s stated values are not just something that they claim to be true, but are indeed perceived and held by the employees of the company? 

A few clues to consider in your evaluation process: 

1. If the company has its values listed internally or in an orientation packet, but they do not advertise their stated values on their website, this would suggest a note of caution. Again, according to the research paper, 15% of all S&P 500 companies do not advertise values. If you don’t talk about your values or share them with outside stakeholders then it is hard to be held accountable to them. It may also indicate that their management wants to be authentic and doesn’t feel the need to advertise values, however it certainly begs inspection.

2. Does the firm, large or small, value their Human Resources Department or efforts. In small, start-up firms many times HR is valued lower than marketing. The commitment of the leadership to focus on their number ONE asset, their human resources, is indicative of their values. In larger companies, is the head of HR part of the Executive Suite? In other words how high up are Human Resources valued? If the head of HR is nowhere near the top of the company, this would indicate a gap and that the leadership of the firm does not have a high attribution to corporate values. 
   

3. Inquire how developed their internal recruiting processes are. If employees don’t want to recommend their friends to work at the company… something may be off.
   

4. Can an employee who has been at the company around one year tell you the values of the company? If the company is living their values, it should be easy and even exciting to share with others the shared sets of values at the firm.
   

5. Can managers and employees give examples of when others made decisions that aligned with the values of the firm? Clearly if no one can, I would question if their values are lip service.
   

6. Lastly, ask the vendors and customers of the firm what makes the company different from others in same field. If examples of what makes the firm different line up with their stated values, you can assume that their values are not just lip service and that the employee on the front lines is living the firm’s values. 
   

I am sure you can think of many more “sniff tests”. The fact that anyone can truth-test stated values should give employees, investors, and customers alike a leg up in identifying if a company is truly anchored by its values (which correlates to performance and profitability) or if their stated values are just the lip service of corporate collateral created in the back halls of the Marketing Department. 

Contributed by Sonja Gustafson:

This spring, after only 7 days on the market, G2B Homes entered into a sales contract for The Sequoia House!  The final sales price was within .05% of our listing price, so we essentially were able to command our price – an excellent indicator of market response to our product.

As a team, we couldn’t be more thrilled with the fruits of our efforts at taking a neighborhood eyesore and turning it into a lovely jewel of green and efficiency.  Not only is it aesthetically beautiful, the house was certified 4-star BuiltGreen and energy testing revealed a tripling of its per-square-foot energy efficiency!

I could go on and on about The Sequoia House (and encourage you to view our cool Before/After video here) and our innovative, sustainable approach to reviving homes in vibrant neighborhoods.

But what I’d rather reflect upon is the affect this project has had on our team and the full complement of specialists and tradespeople who worked on this wonderful home.  From our beginning “charette” meeting where we invited various experts to the house to give us their perspectives (captured in this KUOW radio story), to the local Eco-Building Guild seminar on air sealing, to the house color vote where 40+ votes were cast by engaged neighbors, the home became a place where people could come to imagine, design, learn, teach, and otherwise get involved in sustainable building. Some 86 tradesmen and women plied their skills during the course of construction, many of whom learned about advanced drywall approach, rain gardens, or solar hot water for the first time and can now employ these skills with future clients.

And it won’t be the last time.  Our team at G2B has proven to itself and to the market that our approach of turning existing homes green in healthy urban neighborhoods works.  It really works - seven days to sales agreement, solid pricing, happy homeowners, and energy savings of 15,000 kwH/year certainly support this point!

We are eager to get working on another home, and another, and another still.  Our team has spent the past weeks documenting best practices, finding ways to be even better next time, and getting ourselves ready to roll.  We are heading out to the investment community to raise the funds necessary to operate our company and bring it to scale.

And I just want to say what a joy it has been to work on this project with such talented and passionate people.   It’s a joy to make this one home consume a mere third of the energy it otherwise would.  It’s a joy to have created not just a house, but a home that a community has touched.  And it’s a joy to be working on sustainable, energy efficient housing in an era and community where these ideas matter.

Contributed by Sonja Gustafson:

Dow Jones Newswires published an interesting article two weeks ago on one national homebuilder’s announcement that it will be measuring the efficiency of all its homes.  Using what it calls an Energy Performance Guide (EPG), national homebuilder KB Homes is positioning the rating along the lines of a “miles per gallon” score we are used to seeing on cars, and hopes to use this to differentiate their homes against the competition.

Although I think the EPG is imperfect because it does not account for absolute house size (that is, a big home can get as good a score as a little one, even though the larger will consume much more energy), the idea of a homebuilder asserting a measurement of efficiency is a powerful tool for both the builder and the eventual homebuyer.  For some builders, it may be a way to differentiate their product amongst plentiful competition, or be a way to highlight the company’s fundamental values.  And for buyers, it’s just another valid piece of information that they deserve as they make a major purchase decision.  In the state of Washington, we are required to disclose if a home has a leaky roof, why not leaky walls and windows?  An EPG score may help to tease out some important information about the quality of the home.

What really strikes me about this article is the reaction of another builder who is ignoring the green position.  “I will build whatever the market demands,” says Eric Lipar, chief executive of LGI Homes, a Texas-based builder. “It’s not what the public wants.”  The sad truth is that many builders have in fact built green homes only to see buyers choose something a bit cheaper, a bit bigger, a bit lower in quality.

But.  Let’s look back in order to look forward.  Remember when the public didn’t want airbags in their cars? (I know, this dates me. If you’re too young to remember, there was a big brouhaha over the “significant” cost of adding airbags to cars).  “People aren’t demanding it”, lagging automakers said.  “They won’t pay the cost.”   Then Chrysler decided to install airbags standard across the product line, and suddenly they had both a differentiating factor that made the competition look a little slow, and also played innovative market mover. Can you even find a new car without airbags anymore?  The market didn’t initially demand them; and automakers actively fought against them.  But then, data showing crash survivability emerged and the market moved, and the laggards scrambled to catch up.

KB Homes is clearly making a bet that people will come to value green, even if over time.  They are smart to use an energy rating to assert their position with measurable data.  (We at Green Canopy are happy to see a national homebuilder take this position, one that we announced in 2009 when we chose the Energy Performance Score.)  Part of why builders have not been rewarded for green is that buyers don’t know what the heck green is.  Taking a measurable position (such as energy efficiency) takes out the mystery and makes your case that much more simple to assert.

So I believe that Mr. Lipar at LGI Homes will be one of the many laggards forced to catch up as the rest of the market uses the transparency of an energy score to tease out the information that helps them make their decisions. In this Google era, people are not asking for less information.  They are not asking for less green.  And as valuable data such as energy scoring becomes more commonplace in the residential market, we think consumers will come to demand this sort of information–and the efficiency measures that drive the scores upwards.  The market is speaking, Mr. Lipar.  Move along.