AdvisorOne contributor Angela Herbers delivered a presentation titled “P4—Building Great Businesses by Creating Great Employees,” based on a whitepaper of the same name, to an enthusiastic crowd at the 2012 FPA Retreat in Scottsdale, Ariz. on Monday.
Herbers (left), principal with the advisor consulting firm Angela Herbers, Inc., recently concluded a five-year study on the differences between advisory firms with high and low employee morale. She is also funding research at Kansas State University, where she serves as a faculty member, into the causes of, and cures for, advisor stress.
She began by describing the four “Ps” in the title—preparation, pay, perks and productivity.
“If you master these four areas of your business as they relate to your employees, it will eliminate the need for micromanaging (or even managing), annual reviews and generational issues,” Herbers said.
The difference in attitudes at a P4 firm compared with non-P4 firms can be demonstrated in the following way:
P4 firm—“Why aren’t we marketing more, growing faster, what we can do to bring in more business?”
Non-P4 firm—“I don’t get enough time off and I need to make more money.”
“It’s a mental attitude,” Herbers added. “Instead of trying to hire great employees, the no-problem firms were creating an environment where their employees were prepared, equipped and enabled to help their firms succeed.”
She then moved to a discussion of each of the four:
Preparation—The first and hardest P4 principle to implement is preparation: To create great employees, firm owners need to first prepare themselves to support the success of their employees, and then prepare their employees to be great. The first step is creating an owner’s mentality that focuses on building a successful business. The second step of preparation is designing a culture that fuels passion, purpose, growth and happiness—it’s about sending a clear message to the employees that their job is important, and that their firm and its owner stands behind them. The third step is about giving employees the basic knowledge and skills to excel within that culture: how to communicate, to ask questions, to learn to do their jobs their way, to fuel personal happiness and to know what the goals of the firm are.
Pay—The single most powerful employee motivator is to tie a portion of their compensation to the success of the business. The best way to do this is through revenue-based incentives (which are easy to calculate, easy to understand and eliminate the profit-sharing issues surrounding legitimate costs in small businesses). Compensation rewards that increase as a firm grows create a sense of ownership (in lieu of actual ownership) that is essential to maximizing employee contributions to a business’ success.
Perks—There are a lot of benefits that employers offer to employees, from medical benefits to retirement benefits to lifestyle benefits. Which benefits really motivate employees? Employers must offer medical and retirement benefits, but more importantly, creating a flexible work environment is a good motivator. Plus, it can be tailored to each employee’s needs and optimal work habits without disrupting the firm’s goals.
Productivity—There is probably no stronger message that a business can send to its employees than the quality of the tools it provides to get their jobs done. Today, that means cutting-edge technology and training to use more of that technology’s functionality. Obsolete or barely functional technology tells employees their job is not important and their time is not valued.
“Once the P4 principles are in place, most businesses virtually run themselves, with employees managing themselves and each other,” Herbers concluded. “Still, owners must make a mental shift from trying to manage their business to supporting their employees to be as good as they can be. It’s not about recruiting great employees. As we’ve seen, an unsupportive company can make problem employees out of good ones every time.”