From the May 2012 issue of Investment Advisor • Subscribe!

April 24, 2012

The Virtues of Self-Importance

To build a great firm, owner/advisors have to accept that it really is all about them

One of my owner/advisor clients recently had a problem: His junior advisor wasn’t getting his work done in a timely manner. When I talked to the junior advisor about what the problem was, here’s what he told me: “I don’t think the owner realizes how much work he dumps on me. He’s given me no training or direction on how to do it, and yet expects everything to be done ASAP and done perfectly. It’s impossible.”

When I talked to the owner about what his junior advisor said, I pointed out that he was a very good kid, bright, hardworking, who really wanted to do a good job. The owner responded by saying: “I don’t understand what the problem is. I don’t ask him to do anything that I can’t do, and I put in 60 or 70 hours a week to get it done.” The owner called me the other day to tell me he fired the young advisor.

This is a classic case of how most advisors try to run their firms—and why they are destined for mediocrity at best. By their own actions, owner/advisors inadvertently set their employees up to fail. When the employees ultimately do, owner/advisors blame them, fire them and try to hire someone they hope will do better. They almost never do, and the owner repeats this process over and over, all the while complaining about the “lack of talent” in the job market today.

My P4 practice management principles (see “Let Go to Grow,” Investment Advisor, November 2011) are designed to break this cycle. The first of those four principles is preparation, which is, not coincidentally, the most important and by far the most difficult to get. Preparation is about preparing owner/advisors to build an ultra-successful advisory firm that virtually runs itself. Preparation can be summed up in one simple sentence: All the problems in your advisory firm stem from one source—you.

I told you it was hard to “get.” In fact, I can just see the owner/advisors reading this crossing their arms over the chests and scowling. That’s the usual reaction of owner/advisors who are in the audience when I give my P4 talks. In fact, almost nobody gets it right away. But over time, usually many years, some advisors do come to realize on their own that the success or failure of their advisory firm is almost entirely the result of the actions they take, not their employees. Unfortunately, the time it takes for them to come to this realization usually costs them years of wasted effort and millions of dollars in lost revenues and equity value. My No. 1 job is to shorten that learning curve and get owner/advisors on the path to making decisions that grow a successful firm as quickly as possible.

Like many owner/advisors, the advisor in the sad story above doesn’t yet understand that his actions caused his employee to fail. Among other things, he’s continuing to make two classic mistakes that almost all advisors make: His lack of management has led to the “now” syndrome, in which one crisis follows another, putting himself and his staff under constant pressure to put out these fires ASAP; and the mistaken belief that this ongoing problem can be solved by hiring “star” employees.

I use various techniques to help owner/advisors realize that they have created an environment in which their employees are destined to fail. Usually, the most successful is simple prediction. When owner/advisors refuse to take my advice that the problem isn’t their employees (like the advisor in my example), I tell them: “Fine. We’ll fire this employee and hire another one with even better credentials and more experience, for even more money, and within two weeks, you’ll realize you are doing the same counterproductive things. Within 90 days, you’ll be back in the same place, with the same problems.” It gets their attention when my prediction comes to pass just as I said it would, although in too many cases, we have to go through this process two or three times before an owner admits that the employees aren’t the problem, and we lose some good employees for no good reason.

In some cases, owner/advisors just refuse to come to this realization. When this happens, I have to admit that I start to lose my patience. This happened recently with a client, and I had to go to strategy No. 2: I had a one-hour talk with him and finally just laid down the law. “From now on,” I said, “you can’t complain to me about your staff. When we talk about your employees, just tell me what solutions you’re going to put in place to address the problems. Period.” He called me back the next week and said: “I’ve been thinking about the problem employees I have, and I get it—I can solve these problems. We don’t need new employees.”

Even if they don’t get it right away, I’ve found that most owner/advisors’ learning curves are greatly shortened when they understand the following principles:

Don’t be a boss; be a coach. A boss tells employees what to do and then closely monitors them to make sure they are doing it. If that’s all you have to do, then great. Knock yourself out. But most owner/advisors already have more than a full-time job taking care of their existing clients and trying to bring in a few more. That’s where being a “coach” comes in. For a limited investment of time in teaching each employee to be a great employee, they will virtually manage themselves, with job performance that will exceed the owner’s expectations.

To get these results, owner/advisors need to be coaches to their employees: teach them, motivate them, encourage them, mentor them. Firm owners can still be the boss when it comes to strategic decisions, such as which clients to target, how to bring in those clients and what services to offer them. But tactical operational decisions about how to deliver those services best are made by the firm’s employees. They need to be trained, prepared and equipped to deliver the highest quality client services possible. That means you can’t play the game for them: You need to teach them to do their jobs, so you can do your job.

Have realistic expectations. When owner/advisors expect their employees to do what they do, they are completely disrespecting their own experience and training. In most cases, it’s taken 10, 15 or even 20 years to get where the owner/advisor is professionally. What would it mean if they could hire some kid off the street to do the same job at the same level? It’s not going to happen, and it shouldn’t happen. Your job as the owner/coach is to make your professional employees as good as you are or better. That’s not going to happen overnight or even in a few years (if you’re any good). So give your employees a break, help them to be better, and see how good they can be.

Let employees do their jobs their way. Everybody is different. We all have strengths and weaknesses, and most employees know theirs better than you do. Show them what their job entails, what needs to be done and what results you want. Then let them figure out how to do it. Chances are they won’t do it the way you would. That’s OK; they’re not you. Give them permission to use their skills to get the job done their way. They’ll perform much better, with much less supervision. Tiger Woods once said in an interview that he spent countless hours watching films of great golfers, not to emulate their swings, but to see what they could do with a golf ball. Then he learned to do those things with his swing. It worked pretty well for him. Let your employees swing their own way.

Don’t pigeonhole your employees. When you get an employee in the door, you may have a vision of what you want them to do, but I guarantee that in five or six years, that won’t be what they are doing. The point is that creating a great firm is like putting together a team: At some point you have to deal with the reality that what they can and want to do is not your vision. To create a great team, you have to learn how to use each employee to make the greatest impact on the success of the firm. To do that, you have to get past your rigid adherence to your vision.

To create a great advisory firm, the first step is the hardest. You have to admit that if your employees aren’t successful, it’s your fault. Of course, even the best firms occasionally have to let go of an employee who just can’t seem to fit in. But that has to be the last resort—not the first. The vast majority of employee problems are really the owner’s problems. And that’s a good thing. It means every owner/advisor can control their own destiny and that of their firm, if only they’ll take the responsibility to make it happen.

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