A Defense Against Unwelcome Growth: 2012 Advisor Growth by Design

Adherence to a target client and effective implementation of a value proposition produces a powerful combination for sustainable-growth firms to defend against growth’s negative impacts. Their discipline in adhering to client acceptance and servicing standards limits exceptions that lead to inefficiencies and cost “blowout.”

Processes are Priority

Among other benefits, a stricter focus on serving a target client contributes to efficiencies as there are fewer workflow exceptions necessary. When similar clients can be serviced in similar ways, resource-consuming exceptions are avoided.

Sustainable-growth firms gain further advantage, however, by exercising strict management and oversight of key processes. Perhaps in no other area do sustainable-growth firms outshine their peers more. How work gets done is clearly a priority with sustainable-growth firms. Relative to growth-at-risk firms, sustainable-growth firms are far more likely to have well-documented business-to-client processes. What’s more, staff members are more likely to be aware of, and understand, this documentation (Figure 3).

Further, a sustainable-growth firm relative to a growth-at-risk firm is nearly three times as likely to proactively review the effectiveness and efficiency of processes on an ongoing basis. They are also more likely to have designated a team member responsible for overseeing processes, including development, implementation and management of processes. Better management of processes, combined with a target client focus, results in sustainable-growth firms being more than twice as likely to consistently implement processes relative to their peers.

Higher Return From Technology

Another key distinction for the sustainable-growth firm is a more disciplined approach toward technology. While average technology spending as a percentage of revenue is nearly identical for sustainable-growth firms relative to growth-at-risk firms, sustainable-growth firms tend to have practices in place that enable a higher yield from a similar level of investment.

Those firms achieving sustainable growth are over 50% more likely to utilize their technology in ways that fully support workflow processes. Aligned with their forward-thinking approach to process evaluation and improvement, they are more likely to set annual technology budgets for new investments and have a consistent procedure in place for technology evaluation. Their discipline with technology investment leads to the greater likelihood that sustainable-growth firms report more tightly integrated technology components within their operations. Finally, sustainable-growth firms get more out of their technology by demonstrating a much greater propensity for providing adequate technology training for staff, ensuring that all staff members understand technology systems and are using them effectively.

Greater Productivity

A tight focus on target clients, strong process management practices and an ability to get more out of technology are characteristics of sustainable-growth firms. These practices lead to a higher quality of growth as well as greater efficiency and more productive team members. Professionals working in sustainable-growth firms, relative to growth-at-risk firms, are 18% more productive in terms of revenue per full-time employee (FTE) and 32% more productive in terms of assets managed per FTE (Figure 4).

This edge in productivity is not a result of overworked professionals, but likely a result of a greater ability to focus on clients and prospects. Despite the higher productivity measures, sustainable-growth firms were less likely to report that their professionals were “over capacity.” Driving the productivity advantage is the fact that professionals working for sustainable-growth firms dedicate 63% of their time to client-facing or revenue-generating activity compared with 50% for growth-at-risk firms.

Quality of Growth Trumps Quantity

Good things can happen when firms grow, but it is important to realize that growth can be counterproductive as well. Quantity or pace of growth will not necessarily build value in a firm. Quality growth that is controlled and sustainable will build value.

Sustainable growth, and the long-term success that accompanies it, requires a business discipline that fosters growth while insulating the firm from growth’s negative impacts. This discipline starts with consistently delivering value to a targeted client base and extends to active management of processes and technology in order to achieve the most with finite resources. The result is a defense against the unpleasant side effects of growth and a firm that is well-positioned to take full advantage of increasing scale to build shareholder value.