It’s probably the most common scenario in independent advisory firms today: employee goes to firm owner demanding a raise, a promotion, partnership in the firm or some combination thereof. Owner, caught unprepared, gives a non-response, usually including a promise to get back to the employee. Having larger issues to deal with, the owner-advisor eventually responds with some sort of raise (with the employee asking for yet more money in a year or so), or simply doesn’t respond at all—and the employee eventually leaves the firm.
We don’t have many employee problems in our client firms because our P4 strategies enable employees to be happy—and consequently, very productive. However, with our newer clients (who haven’t yet implemented P4), we often find employees demanding more money, or a career or partnership track.
Over the years, we’ve come to realize that not only are these three common “employee issues” interrelated, they all share the same root cause: an owner who doesn’t know where his or her firm is going. Now before you owner-advisors start freaking out and offering up your litany of excuses and denials (believe me, I’ve heard them all), your lack of direction doesn’t have to be a problem. In fact, it can be the best thing to happen to you and to your firm.
As I’ve written before, firm owners have a tendency to throw money at employees, particularly when they ask for it, simply because it’s the quickest and easiest thing to do and it makes the owners feel good about themselves. Unfortunately, regardless of what employees say, money is almost never the problem. In fact, when employees ask about any of the three issues listed above—money, career track, partnership—they are rarely the problem.
I’ve seen this situation so many times that when a firm has employee complaints, I just know that the owner either doesn’t have a business plan for where the firm is going or, in rare instances, hasn’t communicated the plan to the employees. I know this because I have never (Never! Ever!) seen a firm that has a clear direction for where they are going have employees who complain about money, career track or their future.
How can that be? Simple. From an employee’s perspective, the very worst thing—worse than long hours, unfriendly coworkers or even a micro-managing boss—is uncertainty. People like certainty, particularly when it comes to their jobs. We like to know where we fit in: today, tomorrow, next year, 10 years from now. It makes us feel safe, even comfortable. Why do you think, despite all their complaining about the well-known negatives, that so many people continue to work at large corporations? Because their possible futures—even though some are better than others—are relatively well-known and certain.
The Uncertainty of Small Businesses
By definition, jobs in small businesses, such as even the largest advisory firms, are uncertain. The firm could go out of business. It could be acquired. The market could take another free-fall. The owner could have a mid-life crisis, retire, get divorced and so on. Consequently, even though employees at advisory firms often love their jobs, their coworkers and the lifestyle of working for a small business, they also have a higher degree of job insecurity than most working people.
For many advisory employees, this insecurity often shows up as unhappiness with their job, which they then translate into unhappiness with their pay or their future. I’d estimate that employee concerns about firm ownership, a career track and even pay are 95% about where the firm is going and only 5% about where the employee is going. That’s because once employees know where the firm is headed, they can see how they’ll fit in, their potential and their possible futures. While the future is never certain, it’s still very comforting to know what the plan is.
Owner-advisors, of course, can’t do anything about not owning a large corporation or where the markets are headed. But they can do something about planning where their business is headed—and communicating those plans to their employees. That plan doesn’t have to be very specific or detailed: a general plan will do. To feel better, employees don’t need to know exactly where their careers will be at a certain point. If they know where the company is and where it’s going, they’ll have a general sense of their role in it. What they are really saying is: “Where is this firm going? I want to move up and to grow. Tell me how I’m going to grow.”
The most common reaction to that question from owner-advisors is “But what do I tell my employees if I don’t know where I want my firm to go?” I suspect it’s the reason that most advisors don’t tell their employees where their firm is going—they simply don’t know. Many advisors today seem to be at a crossroads: Their firms have reached a point where they have to decide whether to take their businesses to the next level (with more employees, more advisors, more partners, more client services, more headaches and a bigger investment of capital), or simply keep doing what they currently are doing until they retire and sell their firm for what they can get.
It’s not an easy choice and not one that should be taken lightly. Building a larger firm is a major commitment, one that will have a substantial impact on the owner’s job, lifestyle and likely their income, at least at first.
One Advisor’s Real-World Direction Dilemma
I currently have a client who’s right at this point. He’s generating $2 million a year in revenue with two employees (he’s what I would call a highly profitable solo), but he’s struggling with where he wants to go from here. He has a good life, a good client base and has been holding his growth down around 8% a year. He’s built his firm over 10 years, going 100 mph, 24/7. Now he wants to spend time with his kids, maybe slow down a little, but he realizes that to grow the firm from here will be an entirely new direction: adding more people, making an investment in time and capital and letting go of ownership and control of his firm.
One of his employees is an associate advisor, the other handles client service. They are constantly asking about more money, their career track and ownership. He doesn’t know what to tell them. He’s been stalling them for a year, and he’s worried about losing his employees. They tell me they love the business, love their jobs and just want to know where the business is going.
Many firm owners in this situation just make up a direction to tell their employees something, but then change it again and again. This is probably worse than giving no answer at all: It will frustrate employees and cause them to lose trust in the firm and its owner. Instead, here’s what my client did, and what all owner-advisors who are facing this dilemma should do: Tell the employees the truth. We find telling the truth is far better than breaking the trust of the employees, which kills their motivation and productivity.
Firm owners simply have to admit they don’t know where the firm is going. Yes, it’s hard: You don’t want to look bad. But it explains why things are the way they are, and you’ll find your staff is way more understanding about the current situation. Tell your staff: “I never expected to be in this position. I don’t know where I want to go, but here’s what I’m doing about it: working with a consultant, a therapist, etc.”
Once the owner has opened up, he or she can then include the employees in the process of finding a new direction. Owners can be honest about trying this or that because it’s now part of the innovation process. The employees can be a very valuable part of that process: It’s amazing what they can add. They will show you what their career track is and what they are capable of doing. Often the owner will end up deciding to accommodate the employees’ career plans. The best gift you can give your employees is to include them in the process.
When my client finally opened up to his employees, they said: “Thanks for telling us the truth. Let us know how we can help.” One told me she felt for him and felt bad for pushing. The other had called a recruiter, but now he doesn’t want to leave. These days, they both are staying later, asking to help, working harder. They still don’t know what the future holds, but they feel a part of it, and for now, that’s enough.