Financial benchmarks are no longer the only means of measuring the success of a business. Shared values and causes can attract customers, and a philosophy of doing good boosts team morale.

For small businesses, being a good citizen makes good business sense. Your own community is where visibility and reputation matter the most—and because you live and work there, you have a vested interest in seeing your community and neighbors thrive.

Hiring from within the community, buying from area businesses, incorporating green business practices, and providing opportunities to young people such as internships and job shadowing are great ways to make a difference. Giving back also can come in the form of donations or providing goods or services at cost—but even better is getting out there and having hands-on involvement.

Many Fortune 500 companies use volunteering to support their reputation, morale and skill-development goals, according to research by Boston College’s Center for Corporate Citizenship. “Service sabbaticals” and “team-building volunteering” are becoming common ways these businesses serve communities and themselves.

Several experts actually claim that incorporating volunteering into the corporate culture is the management tool of the 21st century. “Employee volunteering can go a long way toward meeting businesses’ urgent need for meaningful connections,” writes Bea Boccalandro in an article on the Center for Corporate Citizenship’s Web site. “What could be more meaningful than assuaging humanity’s most pressing problems? What could be a stronger basis for connecting with stakeholders than through cherished causes.”

Boccalandro cites Daniel Pink’s A Whole New Mind and Dev Patnaik’s Wired to Care as making a case that business success hinges on companies’ abilities to create higher meaning and deeper connections with customers and other stakeholders. Businesses such as Apple, IBM, Target and Intel are recognizing that activities fostering what Patnaik calls “empathy” and Pink calls “meaning” are critical in developing effective products, staying globally competitive and overcoming everyday business challenges, Boccalandro writes.

Small businesses have long recognized the importance of associating with causes. After all, the name of a hardware store on the back of Little League team shirts could mean the difference in a parent choosing one business over the one down the street.

“Customers are often drawn to us because of our values,” says Jody Kaminsky, vice president of marketing for Ultimate Software in South Florida. “The customers really see the passion in these employees, and they see that we practice what we preach, and they want to do business with us.”

Ultimate Software, twice named best medium-sized company to work for by the Society for Human Resources Management (SHRM), has no problem getting employees involved. “It’s like the more the company gives, the more the employees want to give. I’ve never been at a company where I don’t have to pull teeth to get volunteers for programs or charity drives. We actually have people come to us wanting to put events or programs together. It’s this spirit of generosity that is just everywhere,” Kaminsky says.

Volunteer activities also have been incorporated into software company DAXKO’s culture since it was founded in the late 1990s in Birmingham, Ala. CEO Dave Gray recalls “when there were only 15 or 20 of us early on, you just didn’t have as many hands to help. So the fi rst service project we did as a team was we took half a day and went to a playground and a youth center in downtown Birmingham and worked there.”

DAXKO has grown to around 80 employees who still relish the volunteer opportunities, and they are now starting their fi rst nonprofi t, Gray says. Named one of the top 25 best small companies to work for in 2008 and 2009 by the SHRM, DAXKO also has been recognized for its innovation in team-building by Emory University’s Goizueta Business School.

Gray says fi nding activities that fi t employee interest might take some fl exibility. “If you don’t have a good turnout to a Habitat for Humanity event, maybe your company isn’t as into hands-on kinds of things. Just look for something else that suits them better,” he says.

A cause well suited for Kimpton Hotels & Restaurants was the environment. With almost 50 boutique hotels and chef-driven restaurants in the United States and Canada, offi cials recognized the chain’s environmental impact, and it was the fi rst hotel company to make sustainability a companywide focus.

Named to Fortune’s 100 Best Companies to Work For list this year, Kimpton pioneered and standardized more than 50 daily operational procedures. The hotel company also made updates such as window fi lm to reduce summer heat, energy-effi cient lighting, low-fl ow plumbing, in-room recycle bins and better thermostats and occupancy sensors in bathrooms, offi ces and storerooms.

Niki Leondakis, COO of Kimpton Hotels & Restaurants, says something important hotel offi cials learned was that communication is key to getting staff and guests to use and appreciate the innovations.

She tells how cleaning-staff members initially thought low-foaming cleaning supplies weren’t working and kept adding more product to the solution, which triggered skin rashes and complaints. Managers explained the products were actually doing the job and were designed for less foam. Once workers started using the products properly, they realized they were less irritating to skin and had less noxious fumes than their original products. “They were much happier then, and they love using those supplies now. Every single hotel uses them,” she says.

The changes have been great for business, too. “We see clients and other companies seek us out because of the things we value and the organizations we’re involved in,” Leondakis says.

Indeed, making a difference and making money are mutually supportive goals, writes Richard Barrett, author of Liberating the Corporate Soul. “The more I looked into the issue, the more evidence I found to support my thesis: When companies care about their employees, the local community and society, their employees, the local community and society care about them,” Barrett says.

Research backs up Barrett’s statement. Companies making the annual 100 Best Corporate Citizens List for the past nine years outpaced other Russell 1000 companies in three-year total return by 26 percent, according to CRO, which edits the list. As one CEO whose company was on the list put it: “In good times, being 26 percent better is good. But in bad times, 26 percent better is downright brilliant.”

Speaking at the CRO press conference announcing the 100 Best list, an IBM vice president went a step further. “The message is clear that good corporate citizenship matters,” says Stanley Litow, “and not only is it good for business, it is critical for survival.”