“Most advisors don’t have the guts to make the tough decisions,” the advisor said smugly as he described his latest business move. He had just fired his son—for the second time—and was reeling off a litany of people he had fired as if they were his 10 Greatest Hits. Included in his list were custodians he had terminated, investment managers he had stopped using and the marriage he had ended. I couldn’t help thinking that this advisor’s “gutsy” decision-making might yield less than heroic results.
This conversation curiously contrasted with a meeting I’d had earlier that day with another advisor who proudly shared how he brought his son into the business 20 years ago. Not only was their partnership flourishing, but the son had taken over management of the business and was improving on what the father had started. I consulted with this firm many years prior and vividly recall this individual’s method of careful evaluation and deliberate decision making.
I found the juxtaposition of these two meetings intriguing as both firms include a parent-child relationship. I can easily imagine one family’s holiday dinners as more joyful than the other. In reality, their work environments also differ: One is more driven and the other more nurturing; one is more performance-oriented and the other more relationship-oriented. Most business leaders have a certain style in relating to people, including close relatives. A leader’s management approach permeates the firm.
In the first example, the leader tends to end relationships when they no longer please him or when they fail to fulfill his expectations. The second advisor chooses to identify problems and seek solutions. Both decision-making styles require a degree of courage because each has consequences. While knee-jerk reactions often backfire, decisions should be made fairly quickly. Retaining an unsatisfactory employee for too long often causes others in the firm to lose faith in firm leadership. This is especially true when the person is related to the owner. Consequences include employee dissatisfaction, rebellion against firm policies and defection.
It’s hard to argue with the philosophy of “hire slow, fire fast.” A pattern of failed hires may mean that the problem lies with the one making the hiring decisions in the first place, rather than with the employees themselves.
Where does hiring fall down in most firms? Each circumstance is different, but three complications occur most frequently:
Poor job fit
Poor culture fit
Poor Job Fit
Picking talent is difficult. Even professional talent scouts get it wrong. Take, for example, the book “Moneyball,” written by Michael Lewis, about Billy Beane of the Oakland Athletics baseball team. The book purports that the common recruiting strategies employed at the time were subjective and flawed, arguing that the Oakland A’s used better metrics of player performance to field a team. Beane believed that the method he used, called sabermetrics, provided a superior gauge of talent. Based on Beane’s success, many Major League Baseball teams ultimately adopted the method for evaluating players.
In the financial services industry, leaders tend to use the same timeworn criteria for evaluating talent: job history, education and credentials. They also look for candidates who seem likeable. While qualifications and personality should not be ignored, these elements by themselves cannot predict how well the person will do the job.
Before fielding recruits for your firm, create a job description that defines excellence in the role. Then incorporate measures of aptitude, attitude and motivation to perform the work. For example, if the job involves a repetitive process, a person who prefers multi-tasking will not excel in the position. Likewise, a one-ball juggler will not shine in a three-ring circus.
While financial services jobs require certain technical competence, leaders must consider how a prospective hire will fit into the firm’s culture. This can be challenging.
Start with a statement of cultural values that identifies several personal characteristics desired for members of your team. How do you want your employees and partners to relate to each other and to your clients?
In my previous company we crafted an acronym, PILLAR, to stand for our key firm values:
Passion for Excellence
Lead by Example
Respect for Others
Publish and display the statement of cultural values, and incorporate these values into your performance evaluation process and your interview process. Think about how you would frame relevant questions for new candidates. For example:
Lifelong Learning: What do you do to keep current on new ideas in this business? Have you obtained post-graduate education in relevant areas? Are you pursuing any additional certifications? What are you expecting to learn from this process? How does this job fit into your career plans?
Integrity: Give me an example of a situation in your last job where you felt a moral dilemma. What would you do if a client told you he didn’t want to work with a woman? If you saw one of the partners in our firm do something inappropriate, how would you handle it?
The interview process gives you a window into how people think and respond. While not fail-safe, these conversations help determine whether potential hires will align with the firm’s culture. It’s not just what they say that’s important, but how they hear the question and what they focus on in their response.
Perhaps the biggest problem for both prospective employees and employers is clarity around expectations. In the first scenario I described, the son exhibited a sense of entitlement because of his father’s position. This annoyed other employees and partners, and it also inhibited his desire to work energetically and passionately on the elements the firm’s leadership deem important.
Firm partners must agree on what they expect new hires to do, particularly for those hired in an advisory capacity. After advisors come on board, I frequently hear leaders complain that they haven’t brought in any new business. Was that part of the job description? Were the specific expectations spelled out? Was there any guidance provided on where to prospect and how to approach the market? Had the individual had any previous training in business development?
Thrusting people into roles for which they are not prepared almost always results in failure. To achieve success with new hires, employers must define expectations and discuss procedures for fulfilling them.
Organizational specialists frequently cite the high cost of turnover to a business. According to Vanessa Ruda, partner at Ruda Cohen & Associates, a bad hire in a mid-level position costs between two and seven times their salary. Most disturbing, the Leadership IQ “Global Talent Management Survey” found that 81% of new hires fail. Add substantial lost productivity, reputational damage and low morale, and the consequences of bad hires multiply. For these reasons, advisory firms must be more effective in choosing staff. Your approach to hiring and firing will determine the ultimate success of your business.