In Jim Collins’ book “Good to Great,” he presents a concept he calls the Flywheel Effect. The Flywheel Effect illustrates that businesses are like a heavy flywheel. Management’s job is to get the flywheel moving as quickly as possible because its velocity generates superior results over time.
To get the flywheel to move from a standstill takes tremendous effort. With continuous hard pushing, the wheel starts to move slowly. Over time and with continuous pushing, the flywheel picks up momentum. You get to a point where the weight of the flywheel kicks in your favor. It spins faster and faster, with its own weight propelling it. You aren’t pushing any harder, but the flywheel is accelerating, its momentum building.
Successful independent broker-dealers mirror the Flywheel Effect. They typically exert great time and effort in their early years, building out their infrastructure, systems and procedures. They expend significant effort to keep their advisors and potential recruits satisfied.
However, as a recruiting firm we’ve noticed a trend. When firms get to the midsized level ($75 million in revenue), the things that made them successful get crowded out by other activities, such as conferences and meetings. With the flywheel moving at a nice speed, it’s easy to get complacent and think it doesn’t need attention. However, management absence, or lack of “being there,” can result in a slowing success rate as advisor satisfaction and recruiting decline.
Outside Management Activities Decrease Advisor Satisfaction
At the midsized broker-dealer level, when the flywheel needs less effort to keep spinning, activities such as industry conferences can take on new appeal. We’ve seen countless examples of broker-dealer managers spending more time out of the office attending various industry conferences than in the home office where they are available to their reps.
One successful midsized broker-dealer that has avoided the time-absorbing trappings of industry conferences is KMS Financial Services. Mark Hamby, president of KMS, said: “We try to avoid loading up on conferences that can potentially keep you away to the point where you are perceived as a visitor in your own home office. It’s hard to predict when one of our advisors might really need to talk with one of the firm’s decision makers, but when the need arises, it’s almost certainly a higher priority than conference presentations that probably could be sourced online. For the handful of events we do find worthwhile, we try to take turns to avoid having several of us ‘out of pocket’ at the same time.”
Hamby clearly understands that management needs to be present to keep the momentum of the flywheel going.
When Your Tee Time Takes Priority
It’s at the midsized broker-dealer level that we also notice the dramatic increase in personal time away, with multiple week-long trips to Europe, frequent extended holidays and, of course, golf taking up much larger chunks of time than in the past. If you think the advisors don’t notice your absence, think again. When switching firms, advisors give us this kind of feedback:
At one time, it was easy to get in touch with management, but they’re never around anymore.
Management used to check in with us, but we never hear from them anymore.
Management seems to care more about golf than they care about us.
The Madness of Endless Meetings
During a recent family trip to London, I visited the Churchill War Rooms. A small placard at the museum told of a staff person whose sole duty was regulating the number and length of meetings held down in the underground war rooms. His job was to schedule only the number of meetings that were absolutely necessary and to run these meetings in as short a time as necessary. Part of the reason for that was the added urgency and burden of knowing that wasting time could cost lives. If only broker-dealers could schedule meetings with the same mentality.