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Business is an unlikely hero: a force for good working to solve society's most pressing challenges, while boosting bottom line. This is social purpose at work. And it's a dynamic journey. Purpose 360 is a masterclass in unlocking the power of social purpose to ignite business and social impact. Host Carol Cone brings decades of social impact expertise and a 360-degree view of integrating social purpose into an organization into unfiltered conversations that illuminate today's big challenges and bigger ideas.
Carol Cone:
I'm Carol Cone, and welcome to Purpose 360, the podcast that unlocks the power of purpose to ignite business and social impact. Welcome to another episode of Purpose 360, where we dive into the strategies and insights that shape the future and practice of purpose-driven business. Today we have a very special guest joining us, Daniel Aronson, someone who I've admired for many years. He's the CEO of Valutus, a pioneering consulting firm with over 25 years of experience, measuring and quantifying the value organizations create to their commitment to external values, particularly related to climate sustainability and social impact. Companies he's consulted with, they're the biggest names in the world: Nike, J&J, Novartis, Phillips, and so many more. In today's episode, we'll be discussing Daniel's groundbreaking new book, The Value of Values. This book aims to dispel the long-held myth that values are a cost to business. Instead, Daniel shows us how values can enhance financial success, driving growth, innovation, as well as our personal careers. Let's get started.
So I'd like to start Daniel by just talking about who are you? Why do you do this work? And then a little bit about the breadth of work of Valutus.
Daniel Aronson:
The reason that I started this work is that 30 years ago I was writing a very long paper about environmental versus conventional economics, and I realized that there were a lot of people who were a lot better at a lot of things than I was. And you're very familiar with the saying that it's not up to you to finish the work, but you are not exempt from helping. And that's how I thought. I thought how can I help? It's not my responsibility to finish everything, which is a good thing because there's a lot to do.
And what occurred to me was that there were people who were great at telling stories or communicating messages, people like you, and there were people who were great at making solar cheaper and better and everything else. And I wasn't going to be those people. But then it occurred to me that there was not a lot of great measurement, and that is something that could help advance the work. And so about 25 years ago, I started focusing on that.
Carol Cone:
And I love the simplicity that you say advancing the work. Because I've been doing it for decades as well, how we convince the C-suite, that living values externally having a relationship with society, the environment with our supply chains, with workers around the globe does not take away from the value of our companies and our organizations. It adds significant value. And your new book, The Value of Values, let's just start from the beginning, why did you write it?
Daniel Aronson:
The reason I wrote the book is because there are obstacles in the way of people who are trying to do great work. And some of those obstacles, there's nothing I can do about like the cost-effectiveness and efficiency of solar panels. But there are three big obstacles that I wrote the book to help people to do more for the world and those who live in it overcome. One is sometimes you hear, "We can't afford to do that." And showing the value of acting on values helps overcome that obstacle.
The second one is, "We want to do that, but we don't know how to measure it, so we're going to wait until we do know how to measure it." And that means waiting. And the third thing is some people are reached better by numbers and dollars than by stories. And I wanted to provide people doing good work with a way to those three obstacles.
Carol Cone:
How do you define values? Because this isn't about internal values. It could be empathy, it could be collaboration, it could be innovation. This is something different.
Daniel Aronson:
Yes, it is. All those values are really important, but they're not the focus of the book. The focus of the book is externally-oriented values that are the subject of controversy about their business impact. And that's why we define values as doing good for the world and those who live in it.
Carol Cone:
Great. Okay. And can you just give us a few examples?
Daniel Aronson:
Absolutely. Like should you make your product more environmentally sustainable? Should you help people to get back into the workforce who are out of the workforce? Should you treat your workers better, your supply chain better? Should you focus on human rights and make sure that the suppliers that you're using are not bad for human rights? These are all aspects of things that improve the world and those who live in it. And there's some controversy about whether or not they're profitable and they're good business values.
A lot of people deny that even if you have a company that you think this is what the company should do to be good in the world, a lot of people will say that's not up to you. It's got to be the shareholders. You're taking away money from the shareholders. You're not contributing to the mission of the company, which is to make the most money for the shareholders. And therefore the book focuses on making things better for the world and those who live in it, and in particular, those areas where there's some controversy about their role in business.
Carol Cone:
I love that in your book you say, "Are you a force for good or a force for evil?" So you then turned to quantification of values. So you had that eureka moment, "I've got to measure this in a very distinct way?" Do you remember that eureka moment, that unlocking moment?
Daniel Aronson:
There was one point in particular, which I'm not sure it was exactly when I recognized it initially, but it was kind of what cemented it for me, which is that I was talking to the vice president for a major pharmaceutical company. And he was in charge of donating medicine in Africa. And he said, "You know what? It's too bad we can't measure the value of donating medicine in Africa to the world and to the business, because that would be great. Unfortunately it's impossible." And it was at that moment that I realized wasn't impossible.
It took about two months. It was definitely not impossible. But it was that moment I realized just how big a barrier this was that people would say, "I wish we could do this, but we can't." And in fact it was possible. And he said that would really make a difference. And the fact that I could do something that would really make a difference for a big barrier, that was the moment it kind of crystallized for me.
Carol Cone:
So you did that for two months. And what did you focus on in those two months to create your methodology, your equation, to show that there was value?
Daniel Aronson:
The first thing was there's a lot of value in being known as the company that does this good thing for the world in donating medicine in Africa. And there's a lot of publicity and a lot of brand value, and everybody knows this, but it wasn't really quantified. And what I did was I went to find, okay, how much is it worth?
First of all, how much are these... this much exposure, how much is that worth? And then is there a difference between when you put on an advertisement and when you get earned media? And of course that's true. People are much more likely to believe an article written by a neutral third party or the New York Times or whatever, than they are to believe what you say in an ad. And therefore there's a higher value for that exposure. I went and did that and I put the dollar values on those things, and it was a lot of money. But then there were some things that were missed entirely. For example, if you make people healthier, of course that helps them, but it also their family because then that person can work more. And there's a high correlation of income and health in sub-Saharan Africa in the places where this program was being done.
What I did was look at two things. One is what is this kind of submerged value components? And how can they be captured? If not by you, how could they be captured by somebody else? And then the second thing was quantifying this value that they knew existed but they weren't quantifying. And when you add it all up, it was a lot more than they thought.
Carol Cone:
And one of your key themes of the book is that there is submerged value that companies just miss. And I love the cover of the book because you have this giant iceberg, and as we all know about icebergs, there's a little bit of the top, but there's a lot at the bottom. So share with us what is a submerged value.
Daniel Aronson:
Yeah, submerged value is in fact one of the key concepts in the book, and there's a little section about it right up front for that reason. I'll give you a really simple example. IBM had a factory making microchips for decades, and at one point they decided, "You know what? We're going to reduce the water usage in this factory." Now, this factory was already in a very competitive industry. They'd already been trying to reduce expenses for decades, of course, because that's what happens in the industry. But when they did that, first of all, they saved three quarters of a million dollars in water costs.
Okay, great. That's what we call the visible value. But then they discovered when they did that, that were wasting energy, that they could make things more productive, they could reduce the use of treatments of the water and so forth, and those non-water costs were four times as much in dollar value as the water cost savings. And that's what I mean by submerged value. And once you see this, you see things differently. One of their employees there, Eric Berliner said, "When you see things the way that we do, you don't see water in the pipes. You see dollar signs." And that's the change from looking for submerged value.
Carol Cone:
And I love that quote: we're not looking at water, we're looking at dollar signs. So that's just an excellent example. Can you just name a list of all the different submerged value that you have found when you work with your clients?
Daniel Aronson:
Yeah, absolutely. To start with, some of the value that's sort of semi-submerged, if you will, is the value around employees, because people know that it matters, but they don't know how much. And there are about two dozen elements of this, but for example, you have lower attrition, you have higher engagement, and as a study published by the US Department of Defense points out, higher engagement equals higher productivity. But then you have a bunch of things that people don't really think about. So for example, one submerged aspect is if you are hiring for a job, then by definition, that person will provide more value to you than you pay them.
Because if they cost more to employ than you paid them, than they were worth, then you simply would stop recruiting for that position. What that means is that every month that you have a position open that you really want to fill, and it's not fill, you're losing money. Just by definition. People don't tend to think of it this way, but that means that there's a value in being able to find the best person sooner.
And we know that values help people choose you sooner. And then there's the value of people make fewer mistakes, they're more engaged, they do higher quality work. Another submerged area is the value of all the administration and all the management of these things. And here again, it's like an example of the paper, but I'll give you an example around waste.
And then there's all the change in customer behavior. Now, everybody knows that preference, and a lot of people will understand that longevity matters, but here's a submerged example around customers, which is the customers are more vocal. First of all, they're more likely to prefer you, but if somebody prefers you but doesn't want to talk about it, that's less valuable than someone who prefers you and can't stop talking about it. And it turns out the customer vocality goes up. They're more likely to talk about you when they see that you embody their values.
Carol Cone:
I love it. Customer vocality. That's amazing. And so I'm just curious, were you hired to make the proof, to prove the submerged value? So were you hired to do that or did you say, "I'm going to do this because I'm intellectually so curious and then I'm going to come up with a model that I can take across other industries and really show how values can be measured and quantified and really be powerful?"
Daniel Aronson:
It was kind of a combination. The VP said, "This is a big problem." And I said, "Okay, let me go come up with the model. Let me go solve that problem and let me come back to the VP." And then what happened was I realized that this wasn't a unique problem. And therefore what I did was take that model and evolve it over and over again over the years to try to apply it in lots of different places and to try to overcome this big problem.
Carol Cone:
And so I know that from your model, you've proven that the financial outcomes can be four to 10 times greater or additive for a company. So how did you get to that number?
Daniel Aronson:
Over the course of quite a bit of empirical testing and modeling, we discovered that it was typically four to 10 times or more. And sometimes it's quite a bit more, but I don't want to be real aggressive with what I say about this because it's always better to surprise people on the upside. But for example, one of the earliest case studies of this was there was a company that used a lot of paper. And just they said the cost of paper was very low, but there was the cost to purchase it, to maintain it, to even warehouse it. If you made warehouse a lot of paper in an expensive zip code, an area where the floor space is expensive, then there's quite a bit of money involved in putting it in a place and dedicating expensive office space to it, and then managing it and then disposing of it and so on.
And then there's the shredding and everything else. When you add all that up, it was three to four times as valuable just for that one commodity. And I thought, I bet, just like with paper and just like with other industries like with pharma, there's a bunch of missing value components. What I found out was that that was totally true, that when you make a place more efficient, data center, more efficient, you tend to virtualize and consolidate old servers. And that means they take up less floor space. And raised floor data center floor space is very expensive. And at this time, still today, data center floor space requirements are exploding so much more, which means even just delaying the need to expand the data center by a couple of years, just the reduction in capital expense that allowed was dramatically more than the cost of upgrading the data center or virtualizing it. And that doesn't even count the operational expense. I just kept doing that over and over again.
Carol Cone:
So to me, this is almost like it should be part of every company's strategic plan. And in your book, you said something like values are left off spreadsheets.
Daniel Aronson:
Yeah, that's right.
Carol Cone:
But it sounds like you've got now the measurement to put them on the spreadsheets.
Daniel Aronson:
In particular, four areas.
Carol Cone:
And I love you use the acronym, CORE, for customers, operations, risks and employees.
Daniel Aronson:
People think that the extent of the value is what they see, which is typically energy savings, maybe material savings, but they don't tend to think about all this other stuff. And that means that in terms of customers, they don't think, "How can I quantify how much additional value this brings to customers?" They don't think in terms of risk, how much can I reduce risk? And they don't think in terms of employees, how much does this matter to my employees? And when you add those to the operations, you get not three or four times more, but often much more. Often you get toward the 10X. And that's a really big overlooked area.
And it's not overlooked because people don't understand that they have to pay for floor space or that it costs money when employees leave, or that acquiring customers is really valuable. It's overlooked because they're not drawing the line between acting on values and these other things. What I tell people sometimes is people are self-insuring against climate risk and these other risks, and they're not behaving like that. They're not doing things to reduce their exposure. And since they don't have an insurance policy for them, that means that they're not drawing the line between those risks and the potential financial balance sheet impacts. That's what I'm trying to help people do is to draw the lines between customers, operations, risk employees, the things that people know affect those, and the values-based actions.
Carol Cone:
When you're talking to a potential client and you're trying to convince them to quantify values, what are the top two or three things you say to them, why they should do it?
Daniel Aronson:
There are basically three key things. One is prove the value to a skeptical audience, or prove it so that you can determine how much to invest. For example, one CFO of a multi-billion dollar company said to me at one point, "Only two people ever show in my office asking for money with no numbers, HR and sustainability." That's not the best way to win credibility if you can't prove the value of what you're doing. The second thing is that you want to prove the value so that you can do better. That's improve. Prove and improve. Because once you know where it's creating value, then once you've quantified that, you can then focus on making it better.
And the third thing is it builds credibility. You prove how much it's worth, so you get an ROI. You measure it so you can improve it, and there are some audiences that you reach better with numbers. And you need credibility. You need them to not think of you as the people who show up in the office without numbers. You need them to think of you as business partners. Part of the business.
Carol Cone:
And that's really wise. So now, I'd love to talk with a reference. So whether you can do this or not, I don't know, but tell me your favorite case. And Daniel, for those you can't see, he's smiling, because he wants to tell me his favorite case.
Daniel Aronson:
Yeah, my favorite case is this hundred... I have two really, but I'll start with this one.
Carol Cone:
No two is fine. But first-
Daniel Aronson:
$100 billion company in the telecommunications space and they wanted to look at how to look at the value of sustainability and social action and everything. First of all, we did experiments with about 20,000 customers where we looked at their... And they were really focused on NPS, net promoter score. And where we got the baseline net promoter score and then we told them about some of the things that the company was doing that they didn't even know about. And then we looked to see if that changed their net promoter score and it did.
Then we looked at awareness around the country to see the difference between awareness of the good things that they were doing and net promoter score, and what we found was that in fact, the places that were more aware of the good stuff that they did had higher net promoter score. And then we were able to compare that to the value of, for example, investing in the network. And it was much higher ROI to invest in social and environmental action than it was to invest in the network because you have to do the network, but so does everybody else, right?
And then, we were able to look at what happened to employees? That employees, when they were part of this new initiative, they were more likely to talk about it with customers in the stores. And they had a higher engagement with their customers and with their jobs. And that was also a big surprise. So in this area, you added the benefits of the customers and the benefits of the employees, of doing more and of making sure people were aware of what they were doing. When you added all that together, it was a tremendous, tremendous amount of value. A lot more than they thought going in.
Carol Cone:
And can you put a dollar amount on it in terms of what that actual value became?
Daniel Aronson:
That one, I'm not allowed to say the dollar amount, but I'll tell you about my other favorite case, which is a $50-billion European company. And this one, I am allowed to say the dollar amounts. So we did the valuation of their environmental and social work, went up to the top executive committee in the company for sign-off. We worked with their individual who's in charge of doing ROI calculations for the company. And we did experiments with actually tracking over time what it meant for attrition and engagement of employees, what it meant for B2B customers and so forth. And all of that turned out to be in the nine figures of value. And it was successful in justifying a very large investment in sustainability and social impact.
Carol Cone:
That's a great case. I'm curious, the book has not been out that long. Have you been surprised by the response to The Value of Values?
Daniel Aronson:
A little bit. I have to say that it was very heartwarming to see the response, the support, and the number of people who've been interested in it, even beyond people that I knew before, people in the industry. I think there was a lot of interest from people who help those who are looking for jobs and careers, because I think people, they're putting more of themselves into their jobs and careers. They're making it more of a reflection of themselves than they used to, and therefore, they want to be in a place that shares their values.
Carol Cone:
Great. Super. I'm curious that we have a lot of practitioners who are employees who are in companies that they wish would really lean into this values approach. Do you have any suggestions besides hiring you and your Valutus, to make the case to their senior management that significant investments should be made in values to grow the business and to as well give them a more aligned and empathetic relationship with their work?
Daniel Aronson:
Sure. First thing is that there's a lot about this in the book. Each section has a where to start section. There are a few things that are really good for starting. The first is to start with aim. Who is the audience that you need to convince? What information and what messaging? Then it's getting that information, whether it's quantitative information by surveying the customers, or qualitative information by talking to some big customers or salespeople, finding out what they're hearing, do they think that customers care?
And the last step is to connect it to the value drivers. If you can start with what the executives, or what the audiences need in terms of value, drivers, pricing, flexibility or preference growth, or resistance to new entrants, that kind of thing. So for example, with this sales team, we were able to get them and customers to talk about the depth of relationship with the salespeople. What it turns out is that the people who talked about sustainability and responsibility and social impact more, actually had a deeper relationship with their customers.
Carol Cone:
I love the fact that you're talking about something different to talk with a customer about, that's very human, that has probably measured outcomes for the company and has a commitment to it. And I know that with one of our former clients, PNC Financial Services, that they invested so much in early childhood that when they owe into a new market, that their president would go to a potential account and he would not say, "I want your account." He would say, "Let me tell you what we're doing for your community." And it was very powerful.
Daniel Aronson:
That's great.
Carol Cone:
And I'm just curious about your optimism or pessimism regarding the sustainability folks showing up in the CFO's office with hard data. Will it become a more accepted approach, per se?
Daniel Aronson:
Yeah, it will become more accepted if people do it. Now, that doesn't mean that... And I'm optimistic that more people are doing it, more people are caring about it and so forth. That doesn't mean we're where we need to be. I actually did a survey of a large number of companies spending tens of millions of dollars on average, on what they called CSR a decade and a half ago or more. And on average, those individuals felt that they captured at most, a quarter of the true value of what they were doing. And I've done that again twice since then, a couple years ago, and again, earlier this year.
And we're not very far ahead of where we were in terms of capturing the true value, which means that we're not anywhere where we need to be. But I'm optimistic that when people apply what's in the book, when they apply the methods in the Sloan Management Review articles and everything else, that they will change the perception. And the reason I'm optimistic is it's happened. There was one very large company that we found nine figures of sustainability value for. And the CFO said to me that changed the conversation inside the company. That's what we need to do all the time everywhere as fast as possible.
Carol Cone:
That changed the conversation inside the company. That could be the most profound comment from this entire conversation. Really, really strong. Anything else you'd like to add before I get to a couple sidebar questions?
Daniel Aronson:
Just adding one key thing, which is that there's no need to argue over specific numbers. That if somebody says, "Well, I think it's 7% or 6.2% or whatever," it doesn't matter. And the reason is that when the value is either submerged by being missed or people see it but don't quantify it, they're giving it a value of zero. Anything is more than that. It can't be zero, and therefore there's no need to argue over exactly what it is. What we often do is take the most conservative number and cut it in half and then use that. That way you get real strong conservatism credibility, and yet it's way more than zero.
Carol Cone:
And I love that you do that. I love that you've been in this field for decades, and so you don't go in with this Pollyanna-ish rosy picture. You're going to get all this value. And so I think it's really important for our readers to understand that the methodology of value to us has been proven over the years, and again, it's a conservative view, but it's not zero. So that's really great. Okay, so I'm unrelated, but I've been asking all my guests, what is the future of purpose in an AI-driven world?
Daniel Aronson:
I think the future of purpose is to become a leverage point for the difference between humans and AI. There are a number of authors who have written books recently and have done research about what happens to people's occupations in the era of AI. One of those was called The Feeling Economy. And I had the chance to meet and talk with the author about that. And basically his research says that there was the doing economy, physical doing, and a lot of people that were... Machines, mechanization, even before robots, a lot of that had moved to machinery. Then there's the thinking economy where we are now, and some of that is moving into AI, things like summarizing documents and looking for phrases and so forth. And then there's the feeling economy, like it's different to go into a customer service experience and have it feel like the person cares, right?
If you do AI, chatbot customer service, that's just not the same. And purpose to me is like a multiplier for that, because not only do AIs not really have feelings in that sense, or they're still behind the curve in terms of the human feeling economy, but once you add purpose, it magnifies that advantage and it magnifies it organizationally and individually.
Carol Cone:
Lovely. That's a great answer. So Daniel, I am thrilled that you've been on this show. I know The Value of Values, how leaders can grow their businesses and enhance their careers by doing the Right Thing is just going to be a super selling book. So thank you.
Daniel Aronson:
Thank you so much.
Carol Cone:
This podcast was brought to you by some amazing people, and I'd love to thank them. Anne Hundertmark and Kristin Kenney at Carol Cone on Purpose. Pete Wright and Andy Nelson, our crack production team at True Story FM. And you, our listener, please rate and rank us because we really want to be as high as possible, as one of the top business podcasts available, so that we can continue exploring together the importance and the activation of authentic purpose. Thanks so much for listening.
This transcript was exported on May 21, 2024 - view latest version here.
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