There’s a famous story about Ulysses Grant, when he was in command of the Union’s main army in the western theater of the Civil War. At a time when the outcome of the war was still very much in question, Grant devised a plan that involved moving some 80,000 soldiers hundreds of miles. He was talking to a general in charge of the army’s railroads about making the move happen, who asked him: “General Grant, you’re talking about a massive undertaking, involving men, horses, and thousands of tons of supplies. Are you sure this is the right thing to do?” Grant replied: “No, of course I’m not sure. But in war, the worst thing you can do is nothing. If it turns out this is wrong thing, then we’ll do something else.”
Now I’m not saying that running an advisory firm is like war, but there do seem to be some similarities—and decision-making appears to be one of them. As you might imagine, there’s a mind-boggling amount of literature written each year about business management. Yet, as far as I can tell, most experts these days agree that decision-making by its leaders is the most important factor in the success of any business. In our work, we find that decision-making is so important to the success of advisory firms that we spend much of our time—directly or indirectly—teaching owner-advisors to make better business decisions. Often, it’s an uphill battle.
Part of the problem is that rather than trying to determine what is really holding back their firm—including their decision-making—most owner-advisors want to believe that just hiring the right person/people will solve all their problems. This seems to be a very human tendency: if we have a problem, we look around for someone to help us solve it. Unfortunately, when a business is dysfunctional, hiring more people will only make it worse (unless, I suppose, it’s a new CEO, which most advisory firms can’t afford).
I was explaining this fact to a group of advisors in a workshop a few months ago, when one of them piped up: “I wish we could just find someone like you who could come into our business and make an impact from day one.”
I responded by saying “I can’t make an impact on any business from day one.” They started arguing with me: “But it’s your expertise. How long will it take you?” “Six months,” I said. “Why would it take you six months?” they asked. Me: “It will take that long to learn how you make decisions. Then I can have a big impact.”
Over the years, I’ve realized that different firm owners have different “decision-making” personalities. They tend to fall into three groups:
1) Owners who make decisions very quickly, but after they’ve had time to think about it, they change their minds, not to a different course of action, just to not doing what we had decided. I had one client like this whose action I could nearly predict. I could count on getting an email 36 hours after we had made a decision, taking it back. Owners who have a hard time committing to a course of action greatly limit their firms’ growth, and demoralize their employees with all the starting and stopping.
2) Owners who say they like a new idea, but then drag their feet about implementing it, until it comes out that they don’t actually like it. These people avoid conflict, but in doing so, make honest and clear communication impossible, greatly limiting any help from other people.
3) People, like General Grant, who make the best decision they can based on what they know at the time, with the understanding that if problems arise, they’ll fix those, too.
As you’ve probably concluded, I’ve found the third type of decision makers to be by far the most successful. They tend to make decisions fairly quickly and do what they can to make the decision work. If, after making a reasonable effort to make it work, they realize it’s not going to work, they pull the plug, and try something else.
Most owner-advisors can’t make decisions because they are afraid of making a mistake. You can’t grow a business with that perfectionist mentality. The only bad decisions are ones you stick with long after you should have let them go; and the only thing to be afraid of is your inability to move forward. When you keep moving forward by making decisions and fixing problems as they arise, you stay in control of the direction of your business.
I learned a lot about making decisions from one of my best clients some years ago. We were trying to hire an associate advisor to take some of the workload off his plate. Both of us really liked one candidate who didn’t have any financial planning education or a CFP. But he had been an intern. Still, his asking salary was a bit high, and I recommended to not make an offer to him.
My client said, ‘Let’s try him. What’s the worst that can happen?’ So we did, but within two weeks, we knew he wasn’t going to be an associate advisor. I wanted to let him go, and cut our losses. But the client went back to his org chart to see if there was any other place the new guy could fit. We decided to move him to investment management, and have him leverage the owner that way. He was very successful at the new job, and is a partner in the firm today.
To run a successful advisory firm, owners need to make the best decisions they can, and then make good decisions about problems if they arise. The worst thing you can do is fail to decide. If General Grant could do it with hundreds of thousands of lives at stake, you can do it in your business.