Do organisational values matter? Many managing partners and most human resources directors have a hunch that they do. But because they cannot prove it, they find it difficult to do anything about them.


Research we have conducted changes this - our pilot study of professional service firms demonstrates a clear link between organisational values and performance.



Some values, in particular, seem connected to certain performance indicators. But just taking organisational values seriously, and working on creating alignment between partners and staff as to what they should be, would

appear to be a characteristic of high-performing firms.



Take what many might consider to be one of the most significant indicators: profit as a proportion of fee income. Our research shows that members of more profitable practices are more likely to describe their firm as innovative, risk-taking and entrepreneurial. They are also more quality-focused and - perhaps not surprisingly - more efficient. The research also suggests that successful firms are those whose staff prize enjoyment as a value.



Profitable firms are also more brand-oriented, which is especially interesting as this value is not often associated with professional services. Yet, intriguingly, three of the values that distinguish the most profitable firms - fun, innovative and brand-oriented - also distinguish those that spend proportionally least on marketing. This indicates that brands, like values, have to be lived - they are not just constructs of the marketing department.



Some values are particularly popular in professional service firms, regardless of how they score on performance indicators. The six most popular are: customer-oriented, professional, achievement-oriented, quality-focused, forward-looking and focused. But only one - quality-focused - also appears on the list of values distinguishing the most profitable firms. It would be wrong, therefore, to suggest that these six define the differences between successful firms and others. Perhaps they suggest values that lie at the heart of what it means to be a professional services firm - or maybe just professional. Indeed, the first two on the list were cited by 91% of respondents.



Our research shows that these core values have another significance. On many performance criteria, the firms in which they are most strongly reported perform significantly better than firms in which the same core values are less strongly reported. In particular:

Operating margin is 18% higher;

Fee-income growth is projected to be 62% higher;

Employee engagement is 13% higher;

Fee income as a proportion of head count is 14% higher;

Total employee remuneration as a percentage of fee income is 16% lower;

Perceptions of leadership effectiveness are 22% more favourable;

Partners' remuneration as a proportion of total remuneration costs is 54% higher;

Employees are 36% more positive that their organisation is better than the competition; and

Marketing spend as a proportion of fee income is 24% lower.



On the face of it, this seems to contradict the findings about the values reported by members of profitable firms. So, just how important is it to be aligned with the six core values?



One hypothesis is that firms that invest in and work hard at aligning themselves around a set of values - any values - are more likely to do better across many dimensions than firms that leave such matters to chance.



On the other hand, examining the profit performance criterion in isolation, particular values seem to matter more.



Does this mean that firms that actually invest time and effort in their values will give themselves a good chance of performing better than the competition? We think so. Different firms will have different challenges when seeking to identify their values. The larger and more complicated the firm, the more difficult it will probably be to define values, because, at heart, values are things held dear by individuals.



Do organisational values become less important when an organisation has to satisfy the different needs of many different stakeholders? We do not think so. Yes, in a business dominated by one founder owner-manager, it is easy to define the values that predominate. But, in an organisation that has passed through several stages of evolution, has an established cadre of professional managers, benefits from the support of a disparate group of financial investors, and sells its services to a sophisticated group of professional buyers, it is still possible to define one core set of values.



Robust, objective survey methodology will help identify the values that underpin your firm's management practices. And we can now measure the extent to which those practices and the values that underpin them are likely to support commercial success.



We recognise that such an investment requires time and energy. Perhaps unsurprisingly, the same firms that invest most in the core values also have an 81% higher training and development spend per employee than those firms that are not so closely aligned with the values.



This suggests a relationship between training investment and values alignment - and with performance success as well. And the results of this investment will not only be startling but also very difficult for another firm to copy, thus reinforcing your competitive advantage.



Rupert Merson is a partner at accountancy firm BDO Stoy Hayward