8 Leadership Mistakes That Hurt Your Firm

Over the 15 years I’ve spent working with owner-advisors to build their businesses, I’ve come to realize that their biggest challenge — and that of those of us who help them — is to make the transition from being advisors to being leaders. Usually we’re successful, but I can’t tell you how many times we’ve seen good businesses of all sizes, with good employees, run by good advisors, stagnate — or even self-destruct — because of their owners’ behavior.

In helping advisors make this transition, we’ve found that leadership isn’t something that you’re born with. It’s a skill that has to be learned, and the first step toward being a good leader is the realization that you have to learn to be a good leader. The second step is recognizing which behaviors make someone a bad leader: that is, the actions that undermine the success of one’s employees, one’s business and, ultimately, one’s self. Once you recognize what bad leaders do, it’s a lot easier to do the things good leaders do.

In my work, I’ve identified eight behaviors that prevent owner-advisors from being good leaders. Ironically, all eight come from things that firm owners tell themselves: their own thought processes. You might think that would make these “thinking mistakes” easy to avoid, but the reality is that it makes them harder to uncover. To identify them, we usually have to repeatedly ask a firm owner why they act the way they do — and not accept their superficial answers until they get down to the heart of the matter. That doesn’t make either of us very comfortable, but it does help our clients become good leaders.

Here are the eight behaviors that we find cause most firm owners’ leadership failures:

1. Feeling guilty about their success. This is the most common reason that owner-advisors behave badly. They feel guilty about the money they make, the time they take off, the authority they have over their employees or the stature they have in their community. Because of this guilt, they often do things to undermine their success, consciously or unconsciously, from spending more time out of the office, making bad decisions and being short-tempered with employees, to more destructive behaviors such as drinking too much, other substance abuse, overspending or letting their personal relationships deteriorate.

Quite often, simply recognizing this guilt as the source of their behavior goes a long way toward behaving better. What’s more, we find that much of this guilt stems from a failure to recognize and accept the responsibility that goes with success. When business owners realize that their success has increased their ability to help others, the guilt starts to disappear. We find that this is particularly true of independent advisors, who typically became advisors and started their firms to help their clients. Having a successful business only increases their ability to help others: more clients, their employees, their community and, of course, their family and friends. And there’s no reason to feel guilty about any of these.

2. Doubting they can be leaders. Usually lacking in leadership training or much, if any, hands-on experience, many firm owners lack confidence in their leadership abilities. This is only natural, but it can turn into a problem when their business suffers setbacks, such as a market downturn, the loss of key clients, disappointing performance from a once-promising employee or lower-than-expected results from a marketing strategy. As I mentioned, leadership is a learned skill, and owners need to give themselves time to learn, as well as leeway to make mistakes.

This problem is often compounded by a failure to understand that growing an advisory business is also a trial-and-error process. Because every firm is different — the owners, employees, clients, location, services, competition, etc. — there is no magic formula for success. You simply try the most reasonable next step, monitor the results, make adjustments and try something else if that doesn’t work. When firm owners fail to understand this process, they often blame themselves for setbacks, which can undermine their confidence to keep learning and moving forward.

3. Seeking validation from others. As you may have guessed, this creates a number of problems, the biggest of which is a loss of confidence in the leader by his or her employees. It can also lead to a reliance on employees who tell the owner what he or she wants to hear, or a tendency to assess results in a more favorable light than they warrant. To learn, a leader must gauge results by their real outcome, so that she or he can decide on the appropriate next step. Input from employees and others can be very helpful, but the only validation real leaders need is whether they made the best decision they could at the time, and if they learn from the result.