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June 27, 2019 at 12:00 PM
When owners of independent advisory firms want to increase their revenues, they typically look to add another advisor or two to help them handle a rising number of new clients. More often than not, though, this approach works until it doesn’t. Good advisors are expensive, especially in today’s environment. This means that those additional revenues are, at least in part, offset by additional costs.
Plus, even the best advisors usually take a while to reach their full capacity in a new working environment. Having more advisors also increases the workload of support staff, while changing the culture of the firm — all of which can lead to cost and time increases and further demands on management, as well.
Consequently, when owner advisors come to us looking to add to their professional staff, I usually try to redirect their thinking by asking: “If you had to double the workflow in your firm, without hiring any more people, how would you do it?”
The response usually is: “We can’t do it.” To which I say: “Do you really know you can’t do it, or are you simply assuming that you can’t because you’ve never tried?” The latter, as you might expect, is almost always the case.
Shaking It Up
We all get set in our ways. That’s even more true for small business owners who get attached to the processes and activities they’ve relied on to grow their business to its current point. The business school term for the solution to this problem is “organizational design strategy.”
It means figuring out ways to change your business to be more efficient and more profitable without hiring more people and increasing overhead costs.
For independent advisory firms, organizational design strategy frequently means finding ways for advisors to work with more clients — and to generate more revenues. However, this must happen without increasing overhead and other costs or slacking on client service.
Despite most owners’ resistance, this isn’t really that hard to do.
There are some pitfalls to avoid. For instance, advisors might think that adding clerical support staff would free up advisors to work with more clients.
But remember, my advice is to not increase your overhead. (This also means not adding new partners, marketing programs, technology and services. Simply put, it’s using your brain instead of your pocketbook to grow revenues and profits.)
In most cases, increased support rarely pays for itself. Each new hire usually means losing capacity in the short term and sometimes even in the long term. This is because adding new staff tends to hurt the average productivity of your employees. And, of course, overhead costs go up at the same time.
The alternative is having a strategy. We often suggest that owners and their advisors look for ways to deliver services to clients more quickly and easily — that is, “more efficiently” — before they hire a new employee.
While there are hundreds of ways to do this, here are some starting points:
Specialize. In many firms, each advisor is “a jack of all trades.” He or she handles all the financial needs of each client: financial planning, portfolio design and management, estate planning, insurance, etc.
We’ve found that most advisors are far more productive if they focus on a specific area of service, say financial planning, with other advisors taking care of the clients’ other financial needs.
This allows advisors to greatly narrow their focus, expand the depth of their expertise and decrease the amount of time they spend on the needs of each client.
Think of Henry Ford’s assembly line. Instead of each mechanic building an entire car, each worker specialized in a specific auto part as the demand for cars and their production increased. Doing so increased productivity exponentially.
