What makes a better boss? The New York Times carried a terrific piece written by Adam Bryant on a leadership development plan at Google called Project Oxygen (“The Quest To Build a Better Boss,” New York Times, March 13, 2011). The goal of this plan is to invest in the culture of leadership that will propel Google to the next level of success.
The relevance of this example to leaders of financial service firms is that we are an industry that has invested heavily in technical capability, but in leadership, not so much. As multiple studies of financial advisory firms attest, firms with professional management are growing faster, serving more clients and rewarding their owners more than the average firm.
The question of capable leadership is especially critical in the current environment, where advisory firms are experiencing severe margin compression, an acute talent shortage, a low return marketplace and a reputational taint that has impacted everyone in the advice profession. Business as usual won’t cut it.
Further, as the advisory industry matures and practices transform into businesses, the next big challenge for those who run both broker-dealers and RIAs is to evolve from tactical managers to inspirational leaders. So often this skill is taken for granted or dismissed as too soft, but we can easily observe the performance of many organizations—from sports teams to non-profits to corporations—based on the quality of their leadership. They all have access to the same talent pool, but the ability to transform that talent into a high-performance organization varies.
There are many reasons why one organization flourishes and another flounders. In the end, it’s the leadership that is either the catalyst or the culprit. In financial services, the best tacticians rise to positions of leadership asking the question: “How do we get there more efficiently?” When the market is frothy and high performance comes easily, we don’t really notice if the leaders are good. But with so much uncertainty facing the advisory business today, the future leader will have to be more strategic in addressing the question: “Are we heading in the right direction?”
It is intriguing to me that “The Quest to Build a Better Boss” identified eight good behaviors that Google seeks in leaders, and only one of them targets technical capabilities. How surprising is that in a company known for its technological innovation?
Google began this project with the key assumption that people typically leave a company for one of three reasons. First, they don’t feel a connection to the mission of the business or a sense that their work matters. Second, they don’t really like or respect their co-workers. Third, they have a terrible boss. This last reason turned out to be the biggest variable.
To define a better manager, Google gathered 10,000 observations about managers across more than 100 variables from performance reviews, feedback surveys and award nominations. They then correlated words and phrases that helped them define excellence in management and leadership. Their list of the optimal characteristics of a leader directly applies to every financial services business:
- Be a good coach.
- Empower your team and don’t micromanage.
- Express interest in team members’ success and personal well-being.
- Don’t be a sissy; be productive and results-oriented.
- Be a good communicator and listen to your team.
- Help your employees with career development.
- Have a clear vision and strategy for the team.
- Have key technical skills so you can help advise the team.
Now, there is no epiphany here. Readers of this column and participants in industry conferences have read and heard similar ideas before. But the operating performance of the average advisory firm as reported in industry studies tells us that these principles are not being applied consistently. The average advisory firm lacks clear positioning, sees their costs rising faster than their revenues, and is having difficulty attracting and keeping people.
As consolation, this affliction is not unique to advisors. Google’s Project Oxygen pointed to three pitfalls that every manager risks tripping into:
- Difficulty making a transition to the team because they lack the skills to lead or, if they come from the outside, they fail to understand and adapt to the culture of the organization.
- An inconsistent approach to performance management and career development. This is especially true in advisory firms where the owners often view these processes as too bureaucratic and not contributing anything to the bottom line.
- Too little time spent managing and communicating. In organizations where revenue production, portfolio management and client service are valued over all else, managing is often undervalued and therefore not executed well.
Implications for Advisory Firms
Entrepreneurial businesses such as advisory firms often struggle with priorities around serving clients or managing the business. This becomes a negative cycle. Both areas require discipline and both require attention or the business will never achieve its potential.
Take the lessons from Google’s plan and apply them to your business, or create your own definition of success for managers and leaders. The goal is to know what excellence looks like in leadership and management, and compare that definition to what exists in your firm today.
Who are your best performing leaders and what makes them excel? Do they have gaps? What about the poorest performers? What is keeping them from attaining success in their specific areas of accountability? Of course this evaluation leads to the unspoken question for those who own their own advisory firms: How would you evaluate yourself as a leader and manager against your benchmark for excellence?
Taking time to be introspective and self critical will help guide you on your path to self improvement, just as viewing other managers in your organization with a critical eye will help you identify if there are real impediments to your progress as a business. As Google discovered, companies attract people, but managers lose them. Fundamentally, we work in a people business, so investing in the things that make your firm an employer of choice can be the difference between mediocrity and excellence.
Many advisors feel that creating more structure around leadership and management development is what big companies do, and that this would suck the spirit out of an entrepreneurial environment. That’s like saying playing pick-up basketball around the neighborhood hoop is a better example of the sport than the NBA. It may be more fun, but not necessarily more successful or rewarding.
As advisory firms grow, they require more attention to each area of accountability in the business. Investing in effective leadership requires discipline but can propel your firm to the next level of success now, and help you build a strong succession plan based on the confidence that those who will run the business in the future are not only qualified, but prepared to lead.