In my May 9 blog, “Dealing With the Difficult: Employees, Clients, Referrals…,” I talked about some of the hard decisions that owner-advisors need to be prepared to make if they want to grow their businesses: handling difficult employees, clients, referrals, strategic partners and vendors. That’s not to say that firm owners have to tackle these hard decisions — some people just aren’t comfortable with that kind of confrontation. As I wrote: “Sometimes growth just isn’t that important to an owner-advisor. But if it is, then they are going to have to do the things that make growth happen.”
Unfortunately, in our experience, that list doesn’t include all the hard things that owners need to do to successfully grow their business. There’s another whole category of what might be called “strategic” decisions that many firm owners have a hard time getting their brains around.
We’ve found that most very successful advisory firms do all or most of these things — while not so successful firms do only couple or none of them.
Here are five key strategies that we get the most pushback on from firm owners:
1. Trusting employees. It may be because most owner-advisors don’t have business management training or much in the way of experience managing people, but we find that most firm owners are inclined to micromanage their employees. This has two effects on their business — and both of them are bad. First, as their firms grow and they add employees, most firm owners lose touch with how their business actually runs day to day. So when they have a heavy hand in how their employees do their jobs, owners are usually directing them to a job that doesn’t really exist anymore. Obviously, that’s not optimum.
Perhaps more importantly, being directed how to do a job down to small details stifles the initiative of the employee. Again, as businesses grow, employees see things that owners don’t. Good owners realize that their employees are their best source of information about their firm — and their best source of ideas about how to make it better. So let your employees figure out the best ways to do their jobs, and listen carefully to what they tell you about what’s working and what isn’t.
2. Maintaining an employee focus. Back in 2010, we published a white paper detailing our “P4” program, which is designed to make advisory firms more employee-centered, through Pay, Perks, Preparation and Productivity. P4 is based on the insight that successful business leaders in every industry realize their success largely depends upon the success of their employees. Advisory firms are no exception.
Yet no matter how large their firms have grown, most owner-advisors still cling to the notion that they are the “star” and everyone else is their supporting cast. There’s nothing wrong with that — as long as you don’t want your business to grow beyond your own ability. But in growing firms, owners need to realize that their impact is shrinking and the impact of their employees is growing. So they need to support their employees as much as they can, especially in the key areas of incentivized compensation (Pay), benefits (Perks), training (Preparation) and the tools they need to succeed at their jobs (Productivity).
3. Investing in professional training. In my 15 years as a consultant to independent advisory businesses, the average firm has grown from a couple hundred thousand dollars in review to well over $1 million. And most firms want to continue to grow, usually at an increasing rate.