In the advisory business, a couple of events typically cause a rush of exhilaration: landing a big new client and hiring a great new talent. While the loss of a client can create the opposite emotion—dejection—the loss of a key colleague has a way of bursting one's balloon completely, especially when that individual played an important role in your succession plan.
Countless sorry examples reveal business leaders who groomed a successor only to have that person choose to leave the company. The process of transitioning a firm to new leadership is difficult; enacting a successful and sustainable succession plan is the elusive holy grail of firm management.
When I was still a consultant, a mid-sized advisory firm asked for my help on their succession plan. The firm included three founding partners and six partners-in-waiting—or at least that's what the owners thought. I met with the nine of them together and asked the non-partners, “How many of you would like to be an owner of this firm?” Not one of them said yes. Imagine the shock of the three original partners! When I probed further, the six explained that they enjoyed their current work-life balance, they did not relish the risk of being a partner and they did not have any ambition to take on that role.
While their thoughtful reasoning differs from an outright defection, it reflects the mindset of many key employees in an entrepreneurial environment. Your valuable employees may view their work as a job, while you view it as a career. As a result, whether voluntarily or involuntarily, your firm will experience turnover. This fallout is the flotsam and jetsam of business life. Seasoned managers have seen many one-time employees float by in different careers and with different companies. The coming and going of employees and partners is as natural as the sun rising and setting.
As a firm leader, you must discover which employees have a strong commitment to both the firm's mission and their own progression so that you can invest in them with the expectation of getting a return. Your next challenge is to identify those who can deal with ambiguity, who can perform regardless of pressure and who can stay focused in the face of distractions so that you don't find yourself pouring your wisdom, time, money and energy down a rat hole.
The task of attracting and keeping good people can seem like a chemistry experiment, often risky and with unknown results. Chemistry involves the study of matter and energy and the interactions between them. Matter is anything that has mass and takes up space—in this case, talent. Energy is power translated into motion, overcoming resistance or effecting change—in this case, the ability to work effectively. Understanding how these two elements interact to produce dynamic growth (for the individual and for the firm) will help you become a more effective human capital manager.
People join companies for many different reasons but seem to leave their jobs for just a few: culture, mismanagement, pay or a true desire to do something else somewhere else. This is where the chemistry comes in. For years now, I have preached the belief that if you provide each employee with a compelling future, opportunities for growth, a positive environment and a fair reward, you will ensure your legacy through the individuals you hire. For the most part, these four ingredients are under your control as firm leader.
The elements outside of your control reside within each individual employee. It's hard to know if they feel suited to the job or if they feel appreciated and valued, even when you think you are going out of your way to acknowledge them. It's also hard to know about family pressures such as marital discord, struggling children or anxiety over personal finances.
What are some other reasons that people leave? Certain individuals may shy away from a top leadership position because they doubt their ability to lead, or because they have seen how the stress of that role played out in the life of the current leader. Others fall prey to the lure of greener pastures. Some of your staff may have joined you from other organizations. As normal transition pains or frustrations surface, these employees may fondly recall their previous employers, conveniently forgetting why they left them in the first place. Complaints may include the way in which your firm conducts its business, the employee's inability to get things done or the lack of access to resources. They succumb to the temptation of competitors that project an image of career opportunity, unlimited capacity to grow, infinite resources and rich rewards.
When defections occur, your critics may cite your inadequate human capital plan, your lack of empathy or your failure to provide opportunity quick enough. While some of this may be true, resist wallowing in a negative view of the business. Self-reflection helps to fine-tune your approach to hiring and developing staff, and it is even more constructive to develop a process of checking in with the people in whom you are investing. Were there signs that this hire was a crumbling experiment? Was there anything you could have done to fix it? Is there something you can do now to make the next experiment work better?
The critical areas to examine are:
Your selection process
Your approach to orientation
Your management style
Your compensation plan
Other forces in the business that could become a distraction
When making new hires, we tend to rely on a candidate's resume. While interesting, a paper profile does not illuminate the interests, motivation and ability of the individual to meet all of the job requirements. Do they have the passion, integrity and dedication you are looking for? Do they work well with others? When interviewing prospective candidates, explore how they function in different situations, what they deem to be their optimal culture, what drives them to be successful.
Once hired, the job of making a new employee feel at home begins. The other members of your team will be sizing up the new kid on the block. Are they supportive and helpful, or are they passive-aggressive? Do they take the time to pass along important tribal elements of your business, such as customs and culture, communication styles and behavior? Do they make him or her feel welcome or like an outsider?
Your management style also impacts how your employees feel about working in your company. Do you empower others, recognize their contributions, create a positive learning environment, act with transparency and provide frequent constructive feedback? Do you take a personal inventory through 360-degree evaluations and interactions with your staff and partners, or work with a personal coach to discover what areas you need to work on in order to be more effective as a leader?
Is your compensation plan fair and reasonable? Does it align with the behaviors you seek and the market you are operating in? Do your employees understand how bonuses are paid and how promotions are given? Is your compensation package competitive with the market?
Get to know your employees. What will help them feel positive about you and your company? Be conscious of the employee experience and look for any demoralizing elements inside the firm, such as a sour relationship with another partner or investor, a breakdown in support services, underperforming investment portfolios or the failure to empower others to be accountable for their own jobs.
If running a business were easy, more people would be doing it. Managing your team is by far the most challenging aspect of leading a firm. It can also be the most rewarding. Just as with raising children, no foolproof manual exists to guide you through all the variables of nurturing strong, productive and satisfied employees. Your mission is to effectively supervise the elements under your control while developing techniques to ferret out the uncontrollable elements. Active leadership will enable you to head off any problems and invest your time and resources wisely in developing the next generation of leaders for your firm.