November 22, 2011

5 Keys to Keeping Your Advisory Firm Employees Happy

In my P4 white paper (see “Let Go to Grow” cover story in the November 2011 Investment Advisor), I allude to the fact that the most successful advisory firms that I work with—and many of my business management strategies—are based on the idea that great employees are happy employees. Whether or not they embrace my P4 Principles, I encourage every business owner to take this notion to heart. Every business that hopes to be more than what one person can do has to rely on employees, and the business’ success, at least in part, depends on how those employees perform. And there is a growing body of research (including mine) that shows that happy employees make substantially greater contributions to the success of their firms. 

In his book, “Delivering Happiness: A Path to Profits, Passion, and Purpose,” CEO Tony Hsieh writes about the success of Zappos.com, an online retailer with $1 billion in annual sales.

Zappos has a nearly total focus on the happiness of its employees, under the theory that happy employees are more able and willing to contribute to the success of the firm. I’ve come to that same conclusion. My research on successful advisory firms shows that they tend to have happier employees, as evidenced by lower turnover, virtually no employee complaints and a substantial number of their employees receiving a “great” rating by their employers. Hsieh distills the Zappos experience into four elements of happiness: “Happiness is really about just four things,” he writes: “Perceived control, perceived progress, connectedness, and vision or meaning.” 

Element No. 1: Perceived Control
Zappos creates “Perceived Control” through training and advancement. “In our call center, we used to give raises once a year to our reps, which they didn’t really have any control over,” says Hsieh. “We decided to implement a skill set system instead. We have about twenty different skill sets (think Boy Scout merit badges), with a small bump in pay associated with each of the skill sets. It’s up to each individual rep to decide whether to get trained and certified on each of the skill sets. If someone chooses not to get any, then he or she simply stays at the same pay level. If someone is ambitious and wants to gain all twenty skill sets, then we let the rep decide on the right pace to achieve that. We’ve since found that our call center reps are much happier being in control of their pay and which skill sets they attain.”

Element No. 2: Perceived Progress  
“Perceived Progress” comes from regular, visible advancement. “We used to promote employees from the entry-level position of merchandising assistant to the next level of assistant buyer after eighteen months of employment,” writes Hsieh. “We decided to give smaller promotions every six months instead. After eighteen months, the end result was still the same—in terms of training, certification and pay—as the previous promotion schedule. But we’ve found that employees are much happier because there is an ongoing sense of progress.” 

Element No. 3: Connectedness  “Connectedness” comes from perks that encourage employees to interact with each other.Studies have

shown that engaged employees are more productive, and that the number of good friends an employee has at work is correlated with how engaged that employee is,” says Hsieh. “This is one of the reasons why we place so much emphasis on company culture at Zappos.”

Element No. 4: Vision  
“Vision” or “Mission” is the “why” factor that successful business owners communicate to their employees: why what their firm is doing is both good and important. Says Hsieh: “Companies with a higher purpose beyond just money, profits, or being number one in a market is an important element of what separates a great company from a good one.” 

Angie’s Element No. 5: Harmony
In my work, I’ve added a fifth element to happiness: Harmony. It comes from enabling and encouraging employees to balance their working and personal lives, and never forcing employees to make the choice between work and family. Remember: to have a happy employee, their spouse has to be happy, too—with their job, with their co-workers, with their firm, and most important, with the time they get to spend together. Telling your employees to go home is often the best thing you can do for the success of your business.

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