Entrepreneurs often complain that their young employees fail to “act like owners.” That phrase sticks in my craw. Not because the boss’ desire is not right, but because the execution is often lacking.
Business owners retain certain powers. They can hire and fire, invest in ideas or cut costs at will. They can accept clients and reject clients. They can make decisions on pricing and incentives. This control is especially prevalent in small closely held businesses, such as most advisory firms.
Ownership also means exposure to higher risks and potentially higher rewards. The simultaneous avoidance of pain and pursuit of pleasure — the risk/reward dichotomy — influences owner behavior in a way that non-owners cannot always appreciate.
Employees who did not create the business may not experience the thrill of victory or the agony of defeat the same way the founders do. They may not understand what it was like to go months without a paycheck. Most likely, they have never grappled with the fear of not meeting payroll.
New people coming into financial services today — at least since 2010 — have experienced only up-markets. In most cases, the demand for their services has prevented lay-offs and wage cuts from touching them. The current talent shortage continues to ensure an abundance of job opportunities. Thus, newcomers are able to achieve forward momentum and rising compensation without experiencing the burdens of their forbears; why should they have to “act” like their long-suffering bosses?
Firm leaders who entered the business pre-crisis often expect their followers to suffer as much as they did. New employees look at the tired faces of their leaders and ask, “Why would I want to do that?” This conviction builds when their positive contributions do not result in real ownership in the business.
Many advisory firms maintain a death grip on equity for fear of dilution or loss of control. They use techniques like phantom stock to give employees a “sense of ownership.” Perhaps this is why their employees act like phantom owners.
Words have meaning. When leaders deploy the phrase “act like an owner,” they suggest that employees feel entitled and stubbornly reject accountability and respect. Many leaders are pre-conditioned to believe that young employees lack a work ethic and only wish to milk the owners of their hard-fought gains. These leaders view employees as a cost to be managed, rather than an investment on which to produce a return. As a result, they actually create a dynamic wherein the young employees work in direct proportion to the (low) expectations and potential rewards. Meanwhile, the leaders continue to seethe.
To change this dynamic, leaders must invest in the development and management of human capital. Most employees will rise to the occasion — if given something to which to rise. Advisory firms need career paths that lay out a natural progression for employees. As an individual’s responsibility increases, so does their level of accountability. As with the risk/reward model for owners, when a person owns more of the job, they also own the outcome.
Creating a dynamic work environment with true alignment between risk management and risk taking begins with at least three key ingredients:
1. A clear career path 2. A clear expression of cultural values 3. A clear process for reinforcing the right behavior
Clear Career Path The Workforce Development Committee for the CFP Board Center for Financial Planning (https://centerforfinancialplanning.org/) identified one big reason why advisory firms are struggling to attract and retain qualified staff: they are not very effective employers. Advisory firms were built to deliver financial solutions to clients. They were not designed to develop talent from scratch. In fact, most advisors would prefer to hire experienced service, operations and advisory professionals so that they do not have to invest in training and development themselves.
Consequently, many firms lack a clear journey map for employees. Newcomers have no idea what it will take to move to the next level of responsibility in terms of technical skills, managerial skills or even business development skills.
Top advisory firms have implemented career ladders, wherein each rung carries a definition of success. Employees in such an environment have clarity on how to move up another level, and how they will be helped in their ascension. And firm leaders have a framework for measuring performance.
For example, a new hire must master the technical elements of the role. When they reach the next level, they will manage projects or tasks. At the next tier, they may supervise other staff and engage directly with clients on goal setting and recommendations. At this point, they may start building their network and seeking new client opportunities. Clearly, these jobs cannot be learned in a vacuum — wiser, more experienced and knowledgeable leaders play an important role in guiding and testing their staff as they progress up the ladder.
Cultural Values It may seem trite or fluffy, but firms with a clearly defined culture have a better framework for managing the development of people. Culture goes beyond the obvious expectations of trust, integrity and respect.
If you are building a sales culture, for example, the training and celebration of success will differ from that of a planning culture. If you expect your people to operate as teams and not as a collection of solo practitioners, you must focus on the skills that help people negotiate conflict and interact with others.
Reinforcing the Right Behavior When advisory firms experience excessive turnover of staff, departing employees usually decry the lack of opportunity and hypocrisy in management. Compensation falls way down on the list of reasons why they left the firm. Intellectual challenge, career movement and empathetic leadership tend to produce more stable and effective work environments. Yet leaders commonly fail to recognize how their own behavior influences others. When a top revenue producer persistently acts like a jerk to coworkers but is given break after break — that sends a message. When firm leaders form cliques that exclude certain employees from events or opportunities — that sends a message. While it is reasonable to expect employees to be more assertive with management in order to succeed, leaders do have a responsibility to recognize potential and develop people.
Leaders and employees alike must be accountable for their actions, and aware of the potential effects of their inaction. As Jean Harris, the now infamous headmistress of the Madeira School for Girls, once said, “the greatest indignity one person can commit against another is to underestimate them . . . and we do this by expecting little of them.” In other words, if you want your workers to act like owners, you must promise that their efforts and behavior actually will enable them to achieve ownership, as long they meet your clear expectations about what is required.
Mark Tibergien is CEO of BNY Mellon’s Pershing Advisor Solutions. Tibergien is also the author most recently of “The Enduring Advisory Firm,” written with Kim Dellarocca of BNY Mellon and published by Wiley. He can be reached at firstname.lastname@example.org.