Management consultants are fond of the adage “Companies hire people; managers lose them.” As trite as such sayings are to those who are doing their best to build and run a company, objective observers of how advisors recruit, reward, and retain their staff tend to come to the same conclusion: If advisors dedicated as much effort to management skills as they do to technical proficiency in rendering advice, their practices would be unstoppable forces.
Implicit in that statement is the belief that advisors would want to create such juggernauts. The reality is often much different. Indifference and distaste are good excuses for not spending time improving. As much as we would like to take a pill to get fitter, or win the lottery to get richer, success in any endeavor does not come without commitment. But that, too, is a statement worthy of the triteness hall of fame.
So what does one do? Interestingly, the Twelve Steps of Alcoholics Anonymous contain some good tips on improving one’s practice management (frankly, all of the steps are relevant but I try to remain secular in this column). So please forgive the paraphrasing and the shameless adaptation of a profound and important program:
- We admitted we were powerless–that our business had become unmanageable.
- We made a searching and fearless inventory of our current practices.
- We admitted the exact nature of our wrongs.
- Having had an awakening as the result of these steps, we tried to practice these principles in managing our business.
The Unmanageable Enterprise
While there are exceptions, the vast majority of the hundreds of advisors with whom I have consulted over the years were at wits end when their practices became a certain size. It seems that financial advisory practices hit a wall at various points–at a staff of three, again at eight, again at 15, and so on. While there is no serious science behind this observation, much of it can be attributed to span of control, the points at which supervisors can reasonably manage their responsibilities and the people who report to them.
Solo practitioners who hire administrative or junior associates to help them serve clients while they grow the business experience strain between the attention they must give clients and the training and guidance needed by the staff. Silo and ensemble practices containing multiple advisors plus administrative staff struggle with goal setting, quality control, and the consistent delivery of a desired client service experience. Mature ensembles with 15 or more people tend to grow even more rapidly, often causing employees to feel lost in an organization that lacks the structure for managed growth, and creating a need for emergency handholding to retain important associates.
You know that your practice is hitting the wall of unmanageability when you experience an increase in staff turnover and client complaints, when overhead costs rise faster than revenue, and when you are unable to perform your necessary work at a reasonable pace (you are the only judge of that). While some firms may never have experienced the business version of nirvana–that ideal condition of rest, harmony, stability, and joy–it is a worthy pursuit.
Imagine working with the optimal number of clients while successfully developing others to perform tasks in which you are not interested or at which you do not excel. Imagine doing this while attracting more of the right clients who value your advice and are willing to pay you a fair price for what you deliver. Imagine a personally fulfilling and financially stable business.
The first step in achieving this sense of management control is to envision that idea of success in your mind so that you know what you are looking for, and will recognize when you have achieved it.
The second step to awakening the manager in you is to perform a gap analysis, comparing where you are in your business to where you would like to be.