12
Values: The Character, Actions, and Outcomes

“Open your arms to change, but don’t let go of your values.”

~ DALI LAMA

As I’ve said before in this book, you can manage processes and projects, but you cannot manage people; you must lead people. Leading people is much more than telling or forcing people to do what you want. A prison guard can do that. A good leader creates belief in the mission and values of the firm and will attract people who share those values. When people in a firm share the same values, they behave in acceptable ways without a heavy hand of management. Having a set of shared values is a strong predictor of getting a team to work together successfully.

Values are difficult to understand and espouse. Each person brings his or her own life experience to the discussion of values. For example, one person may have grown up in a family where everyone was very direct and spoke the brutal truth, but another person grew up in a “polite” family environment filled with varying degrees of white lies. Some people view values as standards not to be broken, and others view values as aspirational.

Then, of course, there is the case of the “corporately correct lip service” values where everyone espouses one thing but does another. For example, I see many firms that espouse integrity as a core value then regularly run late on serving each other and their clients. I meet with firms whose partners espouse teamwork but are reluctant to introduce another partner to their clients. These firms often have strategic planning meetings and agree on sets of core values that are nice for public consumption, but they don’t use them to govern their lives. The challenge is to bring a variety of life experiences and views together around a set of values that partners and team members will identify with; be inspired by; and most of all, live by.

In this chapter, I’ll explore the purpose of core values and how they help us govern the behaviors of a team or an entire firm. We’ll discuss whether core values are standards or aspirations and whether, under either circumstance, they are realistic. Lastly, we’ll delve into the dimensions of values: how to find your own and how to sustain them over time.

A good leader will set the tone for a team with the values that he or she actually demonstrates. Values determine how owners and employees will act, and how people truly act creates a culture. If you, your owners, and employees are open, direct, accountable, and responsible, then you will create a culture of high performance and trust. On the other hand, if owners play passive-aggressive games, gossip, backstab, and don’t share credit for success, your culture will be one of low performance and mistrust. Have you ever heard employees complain, “It’s not what they did; it’s how they did it that hurt the most”? Your values, often called codes of conduct or operating principles in a business context, must be lived and enforced.

Usually, a firm expresses a set of shared values, and then, it establishes some working rules or principles based on those values. In our firm, we have a set of values and principles of service. The values are those things that we are always striving to do, realizing that we may never be perfect. The principles are those behaviors that we expect from everyone on our team. Together, the values and principles give us a code to live by and a language to explain how things should work.

When it comes to good leadership principles, Marc Elman, CEO of the local firm PSB Boisjoli in Montreal, Canada, says that his firm goes by the Golden Rule: do unto others as you would have done to yourself.

Bill Hermann, former managing partner of Plante & Moran, PLLC, says

The core values are pretty simple: we care about one another, and do unto others as you would have done unto you. The value part of that is an understanding that we’re in this as a group. One of the principles—teamwork—means that we’re going to do everything we can for the individual but not to the detriment of the team. It takes a while for folks to understand that. If this is something that’s good for you as an individuall, but it screws up the team, it’s probably not going to work.

Although the Golden Rule has been a basic value in our culture for 2,000 years, one author, Tony Alessandra, proposed a refinement that he calls the Platinum Rule. Interestingly, most people understand the distinction immediately, and Gordon Krater, managing partner of the megaregional firm Plante & Moran, PLLC, in Southfield, MI, has come up with it spontaneously without renaming it. He says, “The Golden Rule is how we function. The Golden Rule is typically defined as do unto others as you would have them do unto you. We have defined it as do unto others as they would want to be done unto them. That is, recognizing their differences, and I think diversity has sort of brought a little bit of that.”

The partners at Plante & Moran, PLLC, value placing a client’s interest ahead of their own. Maximizing individual opportunities within the context of the team is another crucial value for this firm. One of the key reasons that Plante & Moran, PLLC, has been selected for many years as one of the top 100 best places to work in the United States is its value of preserving and enhancing the spirits of its team members. Krater continues

There are certain business decisions that might have been good business decisions but sure wouldn’t have done anything for our culture and spirit. And so, we decided not to do them.

We have 225 partners, and from time to time, we must deal with a violation of our core values. I will sit down and talk to that person. Quite frankly, mostly, it’s a misinterpretation, or sometimes, it’s a little bit of stubbornness. But over time, usually, the person realizes, “I shouldn’t have done that.”

With all these difficulties in understanding, why should we try to state our core values? We’ll look into this in the next section.

The Purpose of Core Values

Core values have two dimensions: regulation and inspiration. Although our firm’s values must regulate our behavior, they should also inspire us to a higher level of moral and ethical conduct. Values for resolving ethical questions line up along these two dimensions. For example, if moral standards are rules of the game that we must follow (regulation), moral ideals are the goals of playing the game well and winning (inspiration). Moral ideals portray character traits, acts, and achievements we should aspire to. For accountants, these ideals are implicit in laws, regulations, policies, and customs. We also find these ideals in the examples set by our moral heroes and mentors. And we find them in our core values. Although moral standards are usually expressed in rules, moral ideals are often expressed in stories of extraordinary virtue, acts, or accomplishments. Moral standards demand compliance, and we hold violators accountable. Moral ideals, however, inspire striving, and we admire those who thrive on their ideals.

In any particular case, the line between standard and ideal may be blurred. Indeed, the ideal in some circumstances may be the standard in others. In a values discussion, the nice to have at one time and place may be the bare minimum at another.

Core Values as Standards or Aspirations

We must view core values as both standards and aspirations. Of course, the words used to express a firm’s core values, such as integrity, balanced life, teamwork, and so on, cannot capture all the obligations and aspirations that the core values contain for people. They do, however, provide a basis for discussion when core-value issues need to be discussed and resolved in a firm.

Don’t confuse standard values and aspirational ideals. Both are necessary. Without standards, it is not possible to maintain order, and without aspirations, it is not possible to grow.

Core Values Are Worthless Unless They Govern

There are many ways to describe values. Espoused core values are those with which people agree. For example, everyone believes in integrity, but unless your behavior demonstrates integrity, espousing this value is of little consequence. The problem is that often, these values are nice, and people say them, but they don’t govern their lives. I can say that I value honesty, but if I get an extra $1 back in change at the checkout counter, only I will ever know how much I truly value honesty by how I handle this situation. I can come across to everyone as honest, but in the moment, when no one is looking, only I can really know for sure.

Governing values are those that can be witnessed by people with whom you live and work. We express these as principles of communication. These are the “true” values that you share and the ones by which you make decisions and take actions.

Terry Harris, managing partner of McKonly & Asbury LLP in Harrisburg, PA, gives an example

Responsive service is probably the number one core value here. We want to be able to differentiate ourselves from competitors by our responsiveness. I was at an annual board meeting about a month and a half ago with this client. We were presenting the financial statements of a very respected $300 million dollar, family-owned company. The CFO was singing our praises to the board, and he said, “Just to give you an idea. Last week, my cell phone in my pocket accidentally dialed, and I opened it, and it was ringing Kurt Trimarchi, who’s my tax partner at McKonly & Asbury. I immediately stopped it and put it back in my pocket. Five minutes later Kurt was calling me back to see what I needed.” He was saying to the board it’s an example of how responsive we are. That is central to our whole organization.

Building governing values goes far beyond creating a list of words or phrases that look and sound nice. Governing values emerge when we put our stated values to the test in live situations. We might include integrity and respect in our list of stated values, but how do we apply these values when we learn something negative about one of our coowners or workers? You must actually use the values to make choices. Observing yourself and your team members in real situations will reveal your true governing values.

Bob Hottman, founder and CEO of the top-100 firm Ehrhardt Keefe Steiner & Hottman PC (EKS&H) in Denver, CO, says

The single most important thing that I have to do as a leader of our firm is make sure people understand our values and live those values. They’ll make mistakes, but breaking core values is a mistake that we don’t take lightly. We will not give very many chances to break core values again.

I sit down with every new employee, and I go through our core values. I go through our mission. I go through our vision. I talk about our culture. I talk about the things that are important to us from a firm perspective, and I let them know that we can tolerate mistakes, but we do not tolerate core-value mistakes.

Our first core value is integrity, which is nothing more than doing the right thing. We’ll support people 100 percent for doing the right thing. The next core value is direct, honest, and open communication, and we call that DHOC.

What we truly value as leaders will guide how we work together and will affect the results that we achieve. Our core values have a direct effect on our outcomes because those values guide our decisions and actions. If we are not committed to the values that we espouse, then we will always experience unintended consequences.

Aristotle said, “We are what we repeatedly do.” He was talking about character or the habits that we have formed from the values we live, rather than the values that we simply agree with. Finding what you repeatedly do is often illusory, so how does a person or firm discover those values?

Finding Your Values

While developing your core values, you must ask yourself some questions. Are our values too simple or forceful? Are they so simple, so general, that they can mean anything to anyone? If so, will they turn out to be only this year’s “framed whatever”? On the other hand, are they so demanding that they are unrealistic? Will the values lead to ignoring them, or will they lead to hypocrisy?

How are values defined? What do they look like? They might be written down; more likely, though, they are already part of the genetic code of your organization. They are the norms—the way we do things around here. Often, there was no conscious determination of your core values. They just developed and then evolved randomly, depending on changes in leadership. By looking at your values explicitly, you will have a more coherent and integrated set of values that don’t contradict each other. You will know what you stand for.

So, how many values should we write down and use to govern? Some firms use 5–10 values. Most organizations can make do with 3.

The Elements of Core Values

Core values can be boiled down to three fundamental elements:

1. The character of the persons in your firm

2. The daily behaviors of the people or their actions

3. The results or outcomes from the actions of the team members.¹

In our firm, FiveStar³, LLC, we use these elements to state our core values:

▴ Integrity—The character of our team members

▴ Exceptional Five-Star service—The daily behaviors of our team members

▴ Excellence and return on investment for our clients—The outcomes we obtain

We state our core values as ideals to which we aspire. Although we will have some patience with a newer person on our team who does not do what he or she says, we must see improvement, or we will make a disciplinary decision, up to and including separation. Our tolerance for low integrity is much less for a long-term team member or one of our leaders.

We add to our core values a set of principles of service and communication: the observable behaviors that give life to the core values.

Our Principles of Service and Communication

Go Deep

I will go deep in connecting with team members and clients (especially new ones) to build strong and everlasting relationships. I will be loyal to others, absent or present, by being respectful and nonjudgmental. This principle gives life to the value of Five-Star service by building personal and institutional relationships with our team members and clients.

Be Responsible

I will be responsible in solving all problems, whether mine or others’. I will take ownership and recover, even when in doubt. I will recover, not only for my errors, but also for the errors of our team members and clients. This principle supports our value of getting results for our clients.

Understand First

I will seek to understand first by listening, asking, and restating all orders, whether I am the giver or receiver. Without understanding, we could not live out the value of integrity because the expectations of our client would rarely be met.

Deliver Excellence

I will strive to deliver excellence in everything by doing my best and always building my competence to be better. I am good enough to get better. Delivering the best we can deliver on every project enables us to live out the results and return on investment value that we espouse.

Never Assume

I will never assume that my team members or clients are satisfied. I will be vulnerable and accountable for my promises. I will get over my fear of criticism, so I can improve. Without being vulnerable and accountable, we could not deliver our value of excellence.

Make Their Day

I will make the day brighter for everyone. I will choose an attitude of gladness and service and give the unique gifts that only I can give. I will strive to make a difference in the lives of everyone with whom I work. Each person on our team has certain strengths, and when we work as a team, these strengths enable us to live all our values.

Invest in Myself

I will invest in myself by taking responsibility for growing my capacity to earn, learn, and love.

Bill Hubly, founder and managing principal of the local firm Corbett, Duncan & Hubly, PC, in Itasca, IL, has a similar model

We have three core values at the firm right now, and those core values are

▴ integrity. The premise here is that you don’t get a second chance. If you breach integrity, you will be let go from the organization. Also, integrity encompasses keeping promises and individual responsibility and accountability.

▴ continuous improvement. If you’re not continuously getting better, you’re probably dying. If you’re not growing, you’re dying. If you’re not improving, you’re stagnating, and we can’t be tolerant of that. It’s about growth.

▴ respect. That’s how we treat one another within our firm and how we function in teams and how we respect our clients, our industry, and one another.

In our set of three core values, like those at Corbett, Duncan & Hubly, PC, integrity is about the team member. Five-Star Service is about what the team member does on a daily basis and is ruled by our principles. Excellence and return on investment are about the outcomes that we get for ourselves and our clients. In this way, our core values can completely describe any dilemma that we may encounter.

The first element describes the character of the person who acts, and in our case, we want people to do what they say they will do because that means they will possess integrity. Whenever I interview a potential candidate to work in our firm, I usually ask the person to do some small thing. If that person says that he or she will, then I wait and observe to see if that person follows through. If he or she doesn’t, then we go no further, and we make no offer to join us. But I must realize that even if the person does follow through, the testing is not over.

Trusting someone else has a lot to do with the other person’s intentions. Intentions matter because you want to understand whether a person’s motive for truthfully reporting is a sense of duty or a fear of punishment if caught lying. Today’s Western philosophy has its origins in these questions. Socrates practiced his belief that the unexamined life is not worth living by asking deep questions about justice, courage, and other virtues.² Aristotle believed that moral virtues are habits acquired through practice by finding the mean between extremes.

Are Strong Values Realistic?

Some leaders of accounting firms develop a written set of core values, only to change them frequently or ignore them as standards for working together. Staff members will sometimes not pay attention to espoused core values because they know that the values will not be enforced, or they may be changed. They could be a fad. Businesses of all kinds have bought into the notion of core values. Management tools change, however, and core values may sooner or later go out of style. If the core values du jour become tired, will the firm’s current core values last? Will another leading partner name new core values?

Among accountants or other professionals, a more relevant question about a firm’s stated values is whether they are so unrealistic that they are not meaningful. If we take values literally (integrity, service, and excellent results), they seem impossible to attain. Integrity seems easy; just do what you say you’ll do. But if we take human nature into account, no one can be 100 percent successful with integrity or honesty. We have good and bad days. No one can follow all the service principles all the time, and no person or firm can provide excellent outcomes all the time. Although we do achieve excellent results in most cases, I hate to admit that there are cases when we have failed to help our clients get the best outcomes. If it seems inevitable that people, including firm leaders, will fall short of these impossibly high principles, is it not just as inevitable that cynicism and hypocrisy will result? Stating that you will hold individuals accountable for violations of unrealistic values can only increase the cynicism with which the values are held.

This is why I’ve emphasized that a big part of values is their forward-looking, challenging aspect. They should give you something to strive for, to push your firm to grow. Values that are routinely attained are almost meaningless. Of course, no one is perfect, and values won’t make you perfect. However, without standards and goals, there is no progress. To paraphrase the old saying, if you shoot for the moon and fall short, you can still be among the stars.

Leading by Example

To operate under shared values, the leader must be willing to advertise those values and be held accountable to them. In some firms, the leading partners espouse respect for the individual but allow 800-pound gorilla partners to violate this value. When this happens, the so-called value becomes a laughingstock and can infect the entire firm, with horrible consequences. Most firms have at least an implicit value to help their people when they are in need, but sometimes, they don’t live up to it.

Core Values Help Frame Our Behavior

Your core values create a comprehensive framework for observable behaviors in your business. Some leaders attempt to reduce the importance of actions and outcomes and overpromote aspects of character. However, a narcissistic focus on character will invite some to excuse themselves from moral rules. They might reason, “I am a person of integrity, and so, by definition, I am right, and rules others need to distinguish right and wrong don’t apply to me.”

Some leaders devalue character and consequences by insisting that there is moral worth only in doing the right thing. Similarly, some results-focused leaders see little value in character or moral acts, except to the extent that they produce results. Usually, the person who claims this approach is the high-performing partner with the big book of business. By focusing exclusively on performance and outcomes, you undervalue character.

Well-considered core values can give you balance among people, their actions, and the outcomes, albeit never a perfect balance. The framework of integrity, Five-Star Service, and excellence with return on investment allows the leader and team members to keep the entire structure of values in balance.

Sustaining Core Values

Good values get passed down from one generation of leadership to the next. They become part of the selection, reward, and promotion mechanisms of the firm. It’s no surprise that successful firms with strong values do a lot of promoting from within. And those who prosper do so because there is a natural fit among their abilities, their values, and the type of behavior that brings success in that particular organization. They do not prosper merely by being sycophants. Great firms that make it beyond the first few generations can point back to people like Neal Clifton, Frank Moran, and Don Seiler, who had strong core beliefs that they instilled in their followers.

An intriguing question is, Why have the values of sustainable, continually growing accounting firms remained stable and relevant over the years? Perhaps it is due to the visionary genius of the founders. They no doubt had their own notions of what it took to be successful in their particular fields, and their own personal values and belief systems reflected those notions. This, in turn, helped shape their own basic blueprints for the kinds of people and behavior that fit the nature of the business that they wanted to create.

The values established by founders of firms remaining sustainable over the long term have a common theme: they are not constraining (for example, efficiency). On the contrary, they are empowering (for example, innovation). Although long-held values continue to serve as guides to “the way we do things around here,” the early struggles actually created a climate for collective learning that acted as a catalyst for each individual’s continual development. In these organizations, it became possible for the original values to be revisited and reinterpreted in ways that remained not only true to the spirit of the founders but also relevant to the modern world. The core values did not change, and one value—continual learning—seems to be consistent across the great firms. The clarity of values stands out in these firms. These values serve, in effect, as permission statements, allowing people to act on their own for the good of the company.

Jay Nisberg is one of the top and most successful consultants to accounting firms in the United States and Europe. Of the active consultants, he has the longest tenure: over 40 years. He has spoken to hundreds of thousands of accountants and consulted with over 1,000 firms during his storied career. Jay holds a PhD in psychology and is affectionately known by his friends as Dr. Jay.

Jay has been instrumental in the merger or acquisition of some of the largest firms in the United States. He was a founder of the original Horizon Group; The Advisory Board Company; and the Professionals Alliance Group, a money management firm in association with Oppenheimer.

Jay describes a client who has a unique set of values that give him great leeway in both regulation and aspiration. These values basically depend on the adult actions of the partners. Jay tells

There’s a particular firm that I’m thinking of that is a multioffice firm that has in excess of 100 partners. And the managing partner of this particular firm really has 3 fundamental leadership principles. The first principle is that he expects everybody in the firm to do what they’re supposed to do when they’re supposed to do it. Now, that’s a pretty broad-based principle, if you will. People are always debating, “Well, what does that mean?” And when you go back to this particular managing partner, and you have a dialogue with him, and say, “Hey, you know, what do you mean when you say everyone should just do what they’re supposed to do?”

He says, “You know, at our point in life, you know, when you make partner in a CPA firm, one would think one knows what they should do. We have all these job descriptions for partners, job descriptions for functional areas, and job descriptions for technical expertise.

Why do people who’ve been practicing in the accounting world for 15, 18, sometimes 20 years need a definition of what they’re supposed to be doing?”

It’s because they still want to operate like an employee instead of an owner. Jay goes on

Once you become an equity partner in an accounting firm, you own a business. You have to turn the switch from employee mentality to owner mentality. And if you can’t do that, then you can’t subscribe to the first fundamental premise or principle of leadership that this managing partner subscribes to, which is doing what you’re supposed to do when you’re supposed to do it. Many would call that integrity.

Now, what are those things? Well, there are really basically three things partners need to be doing, one of which is taking care of clients. The second, very obviously, is bring in new business. The third is take care of staff members.

The second leadership principle is also pretty simple: if you act like a jerk, you’re out. Some people in firms just don’t know how to behave any other way than being either disrespectful to people or enamored with their own stature in life or caught up with their own academic credentials or their guruism, if you will, and they become that 800-pound proverbial gorilla that we’ve talked about for years.

This particular concept, you know, that this partner espoused—if you act like a jerk, you’re out—is one of his fundamental premises by how, anytime he leads. When somebody acts like a jerk, there’s actually a book that was once written with that title. He has a stack of these books. And when somebody’s behaving like a jerk, he places one of these books on their desk. And when they come in in the morning, and they see a copy of this book, they’re on a short leash. It’s supposed to be a clue. And the clue basically is, “Hey, look it, you know. I’m getting too much noise in the system about you acting like a jerk. You can’t do this.”

Lastly, Jay explains leadership principle number three

You cannot expose the firm to technical, interpersonal, or managerial risks. I didn’t say no risks. It’s just don’t expose the firm to risks that may put the firm in a bad place. Those aren’t business risks where you might invest money in a service or venture or product. These are risks that might be technical, psychological, or related to human capital. For example, if you’re going to abuse staff or employees here, you probably don’t fit into that leadership principle. The last thing our firm wants is a sexual harassment suit, a wrongful termination suit, what have you.

Sometimes, people have a tendency to modify, bend, or cajole the principles of public accounting to the point where they do things that probably are not within the industry standards of how to behave. “Sometimes, they’re so simple that they’re so profound,” concludes Jay. That’s the way it is with values as both standards and aspirations—sometimes they are so simple, they are profound.

Conclusion

My hope is that you will invest some time and energy in finding your core values. They will help you decide on things you will and won’t do, the kind of people you will hire, the kinds of clients you’ll accept, and the way you live out your mission. In chapter 11, “Vision: Reality in the Future,” we discussed a compelling vision, and in chapter 13, “Mission: Making a Difference,” we’ll get into mission. The values of this chapter tie mission with vision and set the behavioral boundaries that will govern our quest.

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¹ Ethics strategies are often placed in three groups. In the book Critique of Applied Ethics: Reflections and Recommendations, Abraham Edel, Elizabeth Flower, and Finbarr W. O’Connor describe three families of concepts used to formulate ethical issues. They are virtues and vices and the moral atmosphere, the moral law—the straight and narrow path, and the good—ends and means. In his book How Good People Make Tough Choices: Resolving the Dilemmas of Ethical Living, Rushworth M. Kidder describes three principles for resolving ethical dilemmas. They are care-based thinking, rule-based thinking, and ends-based thinking.

² In the Apology, Plato asks Socrates to explain why the unexamined life is not worthy of a human. The Laches is about courage, and The Republic is about justice in the individual and state.