CHAPTER 4
HOW TO GROW THE COMPENSATION PIE: THE MISSION/VISION/VALUES FACTOR
“Leadership is about change. It’s about taking people from where they are now to where they need to be. The best way to get people to venture into unknown terrain is to make it desirable by taking them there in their imaginations.”
—Noel M. Tichy
Firms that maximize profits usually have close alignment amongst mission, vision, values, strategy, and systems, especially the compensation system. If you are concerned at all about driving financial results in your firm, you will eventually need to align owner and employee compensation to the firm’s strategic initiatives.
Before we get into a discussion about tying compensation to the firm’s strategic initiatives, however, it is necessary to have a clear understanding of three critical components of the Organizational Effectiveness Cycle introduced in Chapter 3: mission, vision, and values.
Strategic alignment cannot be achieved unless owners and employees know what to align themselves with. That is why mission (why you exist), vision (where you are going), and core values (how you will treat each other along the way) are so critical to the strategic success of a firm and why they need to be considered when designing an effective compensation system. This is shown in Exhibit 4–1, “The Profitable Firm’s Foundation.”
This chapter discusses how a firm establishes its mission, vision, and values.
DETERMINING MISSION AND VISION
When we facilitate owner strategic planning retreats, we are often asked by one or several owners, “Why are we wasting time talking about mission and vision?” At that point we ask them to write down the firm’s mission and vision.
The responses are usually wide and varied. Most everyone has a different take on why the firm is in business (mission) and what it wants to become (vision). For example, “We want to be the best firm in the market” or “We offer the highest quality service.” Even when a firm has a written mission, almost no one can remember it. In short, it likely doesn’t mean much, and therefore, doesn’t drive individual or collective behavior.
Mission
Gertrude Stein, an American writer, poet, feminist, playwright, and catalyst in the development of modern art and literature, said, “It is awfully important to know what is and what is not your business.” So, let’s start with defining mission and exploring how to develop one.
First, a mission tells everyone inside and outside the firm why you do what you do and why the firm exists. In short, it provides the organization’s reason for being.
Peter Drucker says the mission should “fit on a T-shirt,” yet a mission statement is not a slogan. It is a precise statement of purpose. Words should be chosen for their meaning rather than beauty, for their clarity over cleverness. The best missions have plain speech with no technical jargon and no adornments.1
The mission, as Drucker notes, should be a concise statement of the firm’s business strategy and developed from the customer’s perspective, not the firm’s perspective, for example, “The mission is broad, even eternal, yet directs you to do the right things now and into the future so that everyone in the organization can say, ‘What I am doing contributes to the goal.’”2
As we mentioned earlier in this chapter, public accounting firm owners often have misguided ideas about the answer to why their firm exists. For example, when we ask the question, “Why does this firm exist?” owners usually provide the following answers:
▮ To make a profit
▮ To provide quality service
▮ To be number one in the market
▮ To be recognized as a leader in our market
▮ To provide opportunities for staff
Most initial responses are internally focused and rarely touch upon the real reason the firm exists—the real or psychological needs, or both, that are fulfilled when customers buy your products and services.
Firms do not have a right to exist. They exist only because they provide services or products to a market that needs these services and products. Hence, a more appropriate answer to the question “Why does the firm exist?” might read as follows:
▮ To actively identify operational opportunities that help small business clients succeed.
▮ To understand our clients’ financial goals and then help them to achieve them.
▮ To provide workable technology solutions to manufacturers.
▮ To be the outsourced controller and bookkeeper for small businesses.
▮ To help our clients achieve their personal financial goals through solid investment advice.
When you create or revise the firm’s mission, consider the firm’s core clients, existing service offerings and products, geographic markets, and competition. It’s also best to involve as many people in its creation as possible. A brainstorming session with owners and select employees is an excellent way to get started.
So, how will you know you created a good mission, one that hasn’t been watered down? Here is a brief list of questions to help you:
▮ Is it short and sharply focused so everyone in the firm can remember it?
▮ Is it clear and easily understood?
▮ Does it say why the firm exists?
▮ Is it broad enough?
▮ Does it inspire owner and employee commitment?
▮ Does it illustrate what the firm wants to be remembered for?
Dynamic missions take time to develop since you are trying to capture the essence of the firm in just a few words. It can be done, and it is definitely worth the effort. We can only imagine how much time was spent by the International Red Cross in developing its mission statement: “Serve the most vulnerable.” Take a minute to review the above questions in our checklist against the Red Cross’s mission. You will see the power of a well-drafted mission.
Vision
August J. Aquila and Bruce Marcus, in Client at the Core: Marketing and Managing Today’s Professional Services Firm, best capture the concept of a vision: “There is no concept so dangerous as one that appears the most simple. . . . Most firm managers have an idea of where they want to take their firms. The danger is that they call that idea a vision, without really being able to articulate it. They hang it on a rack, like an old coat, and forget about it.” The authors add, “[A vision is] valuable if it isn’t a vague, unarticulated dream (‘I’d like to have the biggest firm in the region’), or if it’s not based in reality (‘My partner and I would like to be global by this time next year’.) A vision isn’t a wish, or something that can be made to come true by waving a wand.”3
A vision is a useful management tool if there’s a blueprint to accomplish it. It’s useful if it’s realistic, and if you’re willing to take the arduous and meticulous steps to make it a reality. It’s a guide to developing a business plan—and a marketing plan—that accomplishes the vision.
A good vision is an articulated description of your firm’s desired future. Note the emphasis on the future; the vision isn’t true today and it describes your firm as you’d like it to be in, say, five, ten, or more years, and fulfilling it is an ongoing process.
Since clients don’t really care about your vision, it should be an internal document. If your vision is to become a regional accounting firm, clients who need a regional accounting firm to serve their needs won’t likely be interested in you today. They may say or just have the attitude, “Contact us when you become a regional accounting firm.”
Vision creates excitement and passion in people. It paints the future. All of us have had visions in our lifetimes. Young men and women have visions of becoming doctors, astronauts, scientists, lawyers, and accountants. Almost every owner in a public accounting firm started with a vision of becoming an owner and then worked toward fulfilling it.
It is said that Nike’s original vision was “Crush Adidas.” Adidas was the number one sport shoe maker at the time. Everyone at Nike knew what they were working for, and they knew what success would look like.
As we mentioned in Chapter 2, President John F. Kennedy, in 1961, created perhaps one of the century’s most important visions when he said, “I believe that this nation should commit itself to achieving the goal, before this decade is out, of landing a man on the moon, and returning him safely to earth.”
In addition to the checklist in Chapter 2, the following items can also help you evaluate the effectiveness of your vision:
▮ Do all employees understand the firm’s vision?
▮ Does the vision promote a sense of “oh wow”?
▮ Does everyone know how they help the firm achieve its vision?
▮ Does the vision motivate all employees to do their best?
▮ Can owners and employees visualize what their life becomes when the firm achieves its vision?
After clearly defining mission and vision, you are ready to identify, define, and describe core values. These are the behaviors that are acceptable in your firm—how you will treat each other and your key stakeholders along the way.
DEVELOPING VALUES
Values, including how you and others behave in accordance with them, determine the firm’s culture. Values are critically important when creating strategic alignment and designing an effective compensation system.
We follow a three-step process when helping firms develop their values: identify the values, define the values, and describe the values.
Step 1. Identify the Values
Establish four to six core values the firm will embrace. Many firms consider values that relate to client service, shareholders, employees, and the community. Examples may include community involvement, teamwork, integrity, or continuous improvement. Ensure all team members can identify the difference between the firm’s preferred values and its actual values today.
Step 2. Define the Values
Ask all team members to define in 10 to 12 words what each core value means to them. All responses should be taken into consideration, and an assimilation should result in a 12- to 20-word definition.
Step 3. Describe the Values
Invite employees to describe specific behaviors that represent each core value. Ask employees and owners to provide behavioral examples of how each core value is lived in the firm and what it would look like if people were doing so. These behaviors become the criteria against which individuals will be evaluated and on which a portion of their compensation will be determined.
FINAL THOUGHTS
Here is a simple way to determine where your firm stands relative to a real mission and vision as well as values by which people can live. At the end of an owner’s meeting ask each owner to document answers to the following questions.
▮ Do we have a single vision for this firm?
▮ Can every one in the firm clearly state it in 25 words or less?
▮ Do we have one firm culture or many cultures in the firm? If so, why? If not, why not?
▮ Have we identified the three or four most important goals the firm needs to accomplish this year?
▮ If so, how many people in the firm know what they are?
▮ Have we identified what success in each one of these goals means and looks like? If not, when will we do so? If so, what is it?
▮ On a scale of 1 to 10, how motivated and committed are (1) the owners and (2) the staff to achieving these goals?
▮ What has to happen during the next 12 months to achieve the goals?
Then, at the following owner’s meeting, distribute the collective responses. The gathered data will make for robust and dynamic dialogue. Remember, mission, vision, and values are the foundation upon which every profitable firm is built. Firms without them lack clear direction and guiding principles, and firms whose leaders have carefully defined them and execute based on them are positioned for long-term success and profitability.
We also hold that clarity of mission, vision, and values form the foundation for building an effective compensation system. Owners and employees should be rewarded first for doing the right things. The right things are those activities that fulfill the firm’s vision, live its mission, and reflect the firm’s core values. Doing the right things lead to superior performance. And since it’s performance that counts, performance should also be rewarded.
EXHIBIT 4–1 The Profitable Firm’s Foundation
