What You Reward is What You Value
Perhaps the greatest challenge for practices wishing to grow their people, profitability and professional standards is determining what behaviour to reward. And what you reward must be a reflection of what you really value in your business, right?
Why is it that so many firms reward nothing more than a sales result then? Yet they say they care about their people, good processes, professional image, profitability, community involvement…..and so on. There are many things that a great professional practice stands for and cares about in fact, but which are rarely reflected in what they reward.
Figuring out what one should reward is the first step to getting your compensation & motivation package right. Because there should be a “compensation & motivation package” – the two go hand in hand if a remuneration structure is well designed. Remuneration should be more than what, or how, we pay someone. It should be a combination of benefits from salary and/or commissions or bonuses, investment in personal development of the staff member, internal and external recognition of their achievements, policies around time off and community involvement…and their contribution to the professional standing of the practice.
At it’s most simple: the compensation “package” should provide the motivation to do the things which the practice most values.
It follows that the very first step to getting your people doing the things you most value is to define what it is that you actually most value. If I was choosing to zero in on what it is I most value from “my people” today I would be looking at the following in order of their importance to me as the practice principal:
- Client satisfaction & retention.
- Adherence to process.
- Challenging of process.
- Profitability contribution
- Peer Opinion
That may seem an odd list perhaps, especially the order of them. My rationale to support it is that the thing which will matter most to the ongoing success of the business is that the people who pay the bills – our clients – feel that they are getting what they need from the professional relationship. Furthermore, it isn’t enough that clients feel “satisfied” at any moment in time, but that they are satisfied enough to retain our services on an ongoing basis. If we can get that right across the entire business then we have the foundation for a commercially viable business which can continually seek to be better.
In these days of regulation and litigation it is critical that our people understand that our processes – all of our processes, not just the compliant advice process – are there for a reason. They are there for protection of all – including clients – and to help drive efficiency within the business. “Efficiency” in this context means ensuring that our people are able to focus upon their part in the business with confidence, knowing what elements that everyone else contributes, and ensuring we minimise confusion and repetition.
However, I want people to understand that “process” is not set in concrete. It should by a dynamic and ever-evolving aspect of the business. Change will be driven by regulation and evolving best practice standards for sure, but it should also be driven by client-demand and our own awareness of areas of inefficiency or recognition of where new technology can drive a better outcome for everyone involved.
There is no conflict between these last 2 points in my mind either: the first stipulates that “everyone does things the way that we do them around here”. There are no prima donna’s who are free to make their own rules simply because they are hitting some numbers out of the park or whatever. But the second says “we want to be continually alert to doing it better, faster and more efficiently too – so it is always up for debate and suggestion. Things can be cone better“.
Generating revenue – especially just new business revenue – today is not good enough by itself. The cost of acquisition matters, as does the ongoing servicing cost per account, as does business retention. To be blunt: there is little point bringing in (say) $300,000 in new revenues if $200,000 of it doesn’t last 6 months, or if the servicing cost from additional resources required exceeds the amount generated.
The last one is potentially contentious, but if one is to build a practice which is efficient and consistent in its service delivery levels, then everyone has to pull their weight and contribute. One of the challenges for professional services firms leaders is that they often are blissfully unaware of what is happening in the trenches. We think that someone is doing a fine job, but there is always the potential that the individual is just doing a fine job of convincing the Principal that they are doing a fine job. Their peers know the truth though. To counter the productivity issue and enhance everyone’s understanding of the need for teamwork I would consider part of the reward structure being based upon a 360 degree assessment from within the firm. That has the additional benefit of each member of the team feeling that they have an avenue and an opportunity to express views honestly if it is done well.
So if these are the values that one wishes to reward, and a compensation structure is designed accordingly, is the job of rewarding the right behaviours done?
Not at all.
Creating the right “reward” was just the first component. There are a couple of other aspects to making it work, which largely revolve around being consistent in the attention to the right values by actively managing them. So we need:
- Reward. The right compensation & motivation package, as we’ve discussed, is the first element only.
- Routine. We need to sure that the right behaviours are implemented into the daily routines of the practice. They feature in workflows, tasks, projects and reporting. They become a part of the pulse of the practice.
- Reminders. Apart from building management oversight into the daily routine of the practice there needs to be constant reminders about why things matter, and the relevance to the individual staff. “Regular” doesn’t mean daily….but during team meetings or performance appraisals or planning days there needs to be a constant drawing of attention back to the big behaviours and values that you have determined represent how the business will work, and what each individuals place is within that.
Get all 3 components right and you are almost certainly going to be getting the behaviour and work effort that you do actually value.
Most Read IRIS Articles of the Week: April 17-21
Here’s a look at the Top 11 Most Viewed Articles of the Week on IRIS.xyz, April 17-21, 2017
Click the headline to read the full article. Enjoy!
Like so many others in the industry, I was wrong. For years, I was certain that the bull market was nearing its end. I thought the market was over-extended, and that, surely, the wild equities run was coming to an end. But everyone else was bullish, and perhaps rightfully so. And while I’ve watched equities continue on their spectacular rise, I do think now is the time (really!) to put a hedge in place. Here’s why. Here’s how. — Adam Patti
The realities for fixed income investors have changed. How is this being reflected in markets? Bond investing has become increasingly difficult over the past decade. Markets have been heavily distorted by ultra-low interest rates and quantitative easing, as well as by extreme risk aversion in response to the global economic crisis and the eurozone debt crisis. — Nick Gartside
Is being a financial advisor worth it? I am an optimistic person and I encourage other people to keep a positive mental attitude (shout-out to Napoleon Hill and W. Clement Stone). However, by taking a good, hard look at the negatives in life, we can successfully pivot towards the positive aspects that will help us achieve our goals. — James Pollard
How do you treat one of your most valued, existing clients? Here’s a list of some things that come to mind. — Andrew Sobel
According to many advisors I speak with, the only clients that leave are those who have died. And while attrition may not be a big problem in this industry, I have to assume that at least a few clients change advisors without doing so via the funeral home. — Julie Littlechild
I was talking with an advisor last week about how to get into conversations about what he does. He was relaying the story of going jogging with a friend who could be a good client but is, more importantly, connected to a large network of people who fit this advisors ideal client description. — Stephen Wershing
Big picture thinkers are not unicorns - rare and mystical. And they were not born with the innate ability to think big. They do, however, pay attention to the broader landscape and take the time to think, analyze and evaluate. — Jill Houtman and Danny Domenighini
Your reputation is who you are and how you show up, Monday to Monday®. Many of us take our image and reputation for granted. Give careful thought to the kind of reputation that you would be proud of Monday to Monday® and that would resonate with your purpose and priorities. — Stacey Hanke
The generational changing of the guard is a fact of life as old as time. Young replaces old in responsibility, importance, control and culture. Outside of the family, the workplace is perhaps where this is seen most regularly by most people. — Shirley Engelmeier
Next time you hear your prospects give you price objections, it’s not because of the price. The give price objections because they don’t know the full value proposition that they’d be paying for. And it’s not based on their need, or your features and functions. It’s based on the buying criteria they want to meet internally. — Sofia Carter
Last week we wrote about the economic rationale behind going independent vs. moving to another major firm as an employee. As a follow-up topic, we thought it prudent to analyze transition packages attached to big firm moves and peel back the layers of the onion to show the components of these deals. — Louis Diamond
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