Purpose and Values

Values exercises often produce a list of words such as integrity, excellence and teamwork that nobody can recall by Friday. The business then carries on deciding by whatever is most urgent. The test of a value is what happened the last time holding it cost you money.

Purpose is what the business is for. Values are the handful of rules you keep when keeping them is expensive. Underneath both sits behaviour, and underneath that sits evidence; where the stated version and the evidence disagree, your team works from the evidence.

The four layers

Purpose — what the business is for

"To fund a decent life for my family and employ twenty people well" is a perfectly serious purpose. It has to be true, and it has to be yours rather than the one you think you should have. A quick test: would it still be true if the business doubled, and would it still be true if it halved? If the answer changes with the turnover, you have written a target rather than a purpose.

Values — the rules you keep when they cost

Anything you abandon the moment it costs you a client, a deadline or an argument is a preference. Keep three or four that you would enforce.

Behaviour — what you and the team do weekly

This is the layer where values are either applied or dropped.

Evidence — the diary, the bank statement, who stayed

Three months of your calendar and three months of your outgoings describe your real value set.

Why does this matter commercially?

A value you enforce is a decision rule, and a decision rule removes a whole category of decisions from your week. If "we do not take work we cannot deliver well" is real, you stop debating every stretched enquiry, because you have already decided. It also stops decisions that contradict each other.

It matters for hiring too. You can assess skills in an afternoon; values show up around month four, often in the way somebody treats a supplier or handles a mistake they could have hidden. If you cannot state what you will not tolerate, you cannot recruit for it, or manage performance against it.

A worked example

Illustrative arithmetic rather than a client. Take an agency turning over £900,000 with "we do right by our people" on the website, and a client on a £5,000 a month retainer who is abusive to the account team: weekend demands, changed briefs, a designer in tears twice.

The owner keeps the client for eleven months. In month nine the account manager resigns. In month twelve a designer follows. Both cite the same client on the way out. Now the arithmetic: at a 20 per cent net margin that retainer contributed roughly £12,000 a year of profit. Replacing two people on £35,000 each at recruitment fees of around 15 per cent is £10,500, plus perhaps three months apiece before the replacements are productive. Breaking the value cost about as much as the profit the client brought in, and the bill arrived a year later in a different line of the accounts.

In month two the owner has a direct conversation with the client about how the team is spoken to, sets a condition, and resigns the account in month three when nothing changes. He loses £12,000 of profit, keeps two people who together bill six figures, and keeps the credibility to ask the team for something difficult later.

How to apply it this week

1. Write down four values, then hunt for evidence. For each one, find a decision from the last quarter that proves it: a client you turned down, a person you promoted, an invoice you did not send.
2. Apply the cost test. Name the last time each value cost you money, time or a relationship. If it has never cost you anything, you have not been tested on it yet, and you should assume you do not hold it.
3. Rewrite each one as a rule. Write “we tell the client about our mistake before they find it” rather than “integrity”. A rule can be broken, which is what makes it useful.
4. Give each rule a hiring question and a firing line. One question you will ask at interview to test for it, and one behaviour that means someone cannot stay. If you would not let someone go over it, cross it off the list.
5. Audit the diary and the bank statement. Where your time and your money went is your real value set, whatever the wall says.
6. Name the one you have been breaking. Tell the team which value you have not been living up to and what you are changing.

Common mistakes

The first mistake is choosing values whose opposite is absurd. Nobody advertises dishonesty or shoddy work, which means integrity and excellence tell your team nothing and cannot guide a single decision. A real value has a defensible opposite that other good businesses have chosen. "We answer the phone to a human" is a value, because plenty of decent firms decide otherwise.

The second mistake is treating this as a marketing exercise. Values written for the website are optimised to attract, so they describe the business you would like people to think you run. Values written as a filter are optimised to exclude, and they cost you work, applicants and occasionally a friendship.

The third is having too many. Eight values is a list nobody can use under pressure.

Questions to ask yourself

• Out of 10, how confident are you that your team would list the same values you would, without looking them up?
• What did you tolerate last quarter that you would have to admit is a value in practice, whether or not you would write it down?
• Which client or member of staff are you keeping for the money, against something you say you believe?
• If the business had to shrink by a third, what would you protect first, and what does that tell you about what it is for?

Where this fits

This sits at the front of Personal Coaching, because almost every later decision runs through it. Principles and Universal Laws is the same idea applied to your own decision-making, and Privilege and Responsibility is where the nerve to enforce a value often has to come from.