The 3 Company Virtues Every Business Should Have

This article is an excerpt from the Shortform book guide to "What You Do Is Who You Are" by Ben Horowitz. Shortform has the world's best summaries and analyses of books you should be reading.

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Do people in your organization feel free to air their concerns? Do they trust each other?

In What You Do Is Who You Are, Ben Horowitz draws lessons from samurai warriors on how to develop your organizational virtues. While he believes that you should choose virtues that are customized to your company, he argues that all organizations should have these three virtues: trust, freedom to speak freely, and loyalty.

Here are the details on these three essential company virtues.

The Essential Company Virtues

While Horowitz argues that you should choose virtues specific to your company and its strategy, as the samurai created an honor code specific to being a warrior, he also believes there are three foundational company virtues essential to every organization: trust, freedom to speak up, and loyalty.

(Shortform note: Some experts agree that there are certain values all companies should have, but in Built to Last, Collins and Porras argue that visionary companies have different philosophies and all they agree on is on consistently adhering to whatever philosophy or values they claim as their own.)

Essential Virtue #1: Trust

According to Horowitz, trust is essential because organizations can’t succeed unless employees trust that their leaders and peers are furthering the mission. But trust can only come from being consistently truthful, and in high-stakes environments, that’s easier said than done. Horowitz points out that sharing inconvenient truths can create uncomfortable situations and make a company vulnerable. Giving people inside or outside of the organization access to information that puts your company in a negative light, or reveals your weaknesses, can prevent immediate gains. 

For instance, if a company is closing a low-performing branch, being truthful about what’s happening would get negative attention and might even cost it some business. The leader wouldn’t want people to think the company’s in crisis and worry that it might close other branches, or stop fulfilling its commitments to customers. Being less transparent about what’s happening might be appealing—but Horowitz says this would be a mistake because it would undermine the trust employees, clients, and partners have in the company.

(Shortform note: Dare to Lead (Brené Brown) discusses the consequences of not building trust into your organization’s culture. She says that when there’s no culture of trust in a workplace, team members hold back from expressing new ideas, they have a harder time recovering from failure, and they develop toxic defensive behaviors.)

Horowitz outlines the following steps for sharing an uncomfortable truth without letting it take over the narrative:

• First, tell the truth. Being upfront about the situation helps secure people’s trust in you as a leader. Show people that you’re aware of what’s happening and that you’re not going to hedge or hide. In the example above, leadership should step forward to tell people exactly what the plan for the branch is and why they made the decision to close it.
• Second, admit whether and how you contributed to the problem. This helps people feel confident that you’ve learned the lesson and won’t let this happen again. Let people know what you’ll be doing differently in the future. In our example, leaders should assess and communicate why they failed to make the branch successful and how that will inform future actions so that it doesn’t happen again.
• Third, frame the necessary next action within the organization’s broader purpose. Reframing the situation helps shift the conversation from the momentary crisis to the overall path you’re on—from concern to confidence. In our example, the leader should communicate how the branch closing will allow the company to focus its resources in areas where it can have a bigger impact, and help everyone achieve success.

Essential Virtue #2: Freedom to Communicate Concerns

The second company virtue Horowitz argues all organizations need is the freedom to communicate concerns. If team members don’t talk about the problems they notice, the problems become much harder to solve because, by the time you find out about them, they’ve grown exponentially. 

(Shortform note: Acknowledging problems is a characteristic of adaptive organizations—those that can adjust and thrive when faced with novel challenges. In The Practice of Adaptive Leadership, Ronald Heifetz explains that freely acknowledging problems means encouraging everyone to bring up problems and ask uncomfortable questions. To foster this characteristic, he suggests not shying away from uncomfortable problems and encouraging contrarians who aren’t afraid to speak up.)

Horowitz outlines several reasons employees might hesitate to share their concerns:

• They might have caused the problem and don’t want to expose themselves to negative consequences for their job or career.
• They might not know how to solve the problem and don’t want you to interpret this as a lack of ownership.
• They might not want to interfere with immediate company goals by addressing a long-term issue. 

(Shortform note: In Dare to Lead, Brené Brown argues that many work cultures are characterized by self-interested and self-protecting behaviors like the ones listed above, including avoidance of tough conversations and the refusal to take risks. These behaviors stifle a work culture’s creativity and learning, and they’re toxic to the potential for innovation. The antidote is practicing four courage-building skills: being vulnerable, choosing and practicing values, building trust, and developing failure resilience.)

To counteract employees’ reluctance to speak up about their concerns, Horowitz says leaders should explicitly ask employees to bring problems to their attention. For instance, when he was CEO, Horowitz required that everyone who attended executive meetings bring at least one problem.

(Shortform note: In Good to Great, Jim Collins shares four steps to follow to foster a culture where facts can come to light: 

• Ask your team a lot of questions, and don’t feed them your own answers. 
• Cultivate real debate where employees’ input can actually steer decision-making. 
• When a move goes wrong, conduct detailed autopsies without assigning blame. 
• Implement alarm-bell mechanisms that employees can activate if they see something’s wrong.)

Essential Virtue #3: Loyalty

The final virtue Horowitz believes all companies should incorporate is loyalty. Loyalty sets off a virtuous circle that makes work relationships productive and sustainable. Ideally, when leaders are loyal to employees, employees want to stay in the company and therefore strive to do their best work. In turn, leaders know they have a workforce they can rely on, and they do their best to keep them happy.

However, to foster the virtuous circle of loyalty in a dynamic labor market where people change jobs often, Horowitz says you must define and communicate how you will show loyalty to your employees so they know what they can expect from you. 

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• The three reasons leaders should care about culture
• How a sense of purpose boosts employees' performance
• What the Samurai and Genghis Khan can teach you about leadership

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