In the last three years, many of the firms we consult agreed to this recommendation: They ditched the traditional employee performance evaluations forever. Instead, they now ask team members what they were most proud of over the past year and what they’d like to see improved. The only goal for these meetings was to listen and learn. As it turns out, the learning was invaluable—many of the suggested improvements helped to drive these firms’ growth over the past year.
It's a reminder that often the most basic actions, like asking for our employees’ input, can make the greatest difference when it comes to business growth. Going back to basics is something I plan to write a lot about this year. I feel it’s especially important in periods like this one, where turbulent markets have pressured firms’ revenues and the environment remains uncertain.
To really understand what the basics are and why they matter, it important to first understand the trajectory of growth for the typical business and how it applies to advisory firms. Years ago, researchers Neil C. Churchill and Virginia L. Lewis identified five phases of business growth. At different stages of a business’s maturity, key growth drivers are creativity, direction, delegation, coordination and collaboration.
Growth Through Creativity
Young advisory firms are often known for their deep creativity and innovation. Finding resourceful ways to reach and serve clients is necessary for startups, and they help create an exciting work environment. That may explain why so many firms that are well established continue to act like startups.
But when firms are further along the growth curve, a continued emphasis on creativity and innovation leads to the neglect of areas that are essential for continued growth. Believe it or not, over-innovation is one of the major problems we see in mid-size advisory firms, defined as those with over $1 million in revenue and under $10 million in revenue.
Owners of these firms often grow bored with executing the same processes and client experiences over and over. They’d rather innovate. But doing so generally winds up hurting the business. To take your focus off what you've already created and what has worked well up to this point is to hamstring your future growth. The art of growth is consistency: Doing the same thing repeatedly until you've mastered it and built a brand around it. The best leaders are still doing some of the same things they did 20 years ago, and it's still working.
Growth Through Clear Direction
One of the biggest growth killers, especially for mid-size firms, is the need to reach consensus when it comes to setting direction. The fact is firms need a leader who is brave enough to set its direction, even if it’s different than what others want. When a firm is struggling to get its growth moving, the issue probably doesn’t lie with things like marketing or client experience. Often, the problem lies with leadership. If your firm’s decisions are being made in consensus, and you’re not growing to your potential, make it a goal to get out of consensus and name a leader.
Growth Through Delegation
There's a point in the growth cycle of every firm where the leader needs to begin delegating. And that doesn’t just mean passing off work. The most impactful delegation involves handing off consequential decisions. If you have a growth problem yet your staff still comes to you for direction and validation on decisions, then real delegation isn't happening.
Professional financial advisors need autonomy to make decisions with and for their clients. Marketing leaders need to be able to make some marketing decisions on their own. And so on. Most advisory firms focus on delegation of tasks. But delegation of decisions will take you much further.
Growth Through Coordination
This growth driver is almost always the hardest one for leaders, especially founding owners, to embrace. If you’re a founder, your business is practically a part of you. It takes a lot to surrender control, even a little. But if I’ve learned one truism in my 20 years of business consulting for advisors, it’s that you must let go to grow.
Letting go to grow means understanding how to coordinate and organize your people in a way that builds upon autonomy and deepens trust. We will never be able to trust our team if we continue monopolizing the decision-making process. For leaders, growth through coordination does mean living with a higher degree of uncertainty, but it also means creating a higher ceiling for growth.
Growth Through Collaboration
The stage in which growth is driven by collaboration is one that every advisor business, especially the mid-size ones, should ultimately aim for. Growth through collaboration occurs when leaders accept that others within the organization share the same goals and have valid ideas and key roles to play in achieving them. This doesn’t mean a decision-making free-for-all. The organization’s leader should still be the final decision maker. The power of multiple collaborators makes the growth wheel turn and will help you get to wherever you're going faster.
Understanding the framework I’ve just described can help leaders recognize when their strategic focus is slipping to earlier stages of growth. This happens routinely in declining-market environments. As account balances stagnate or shrink, owners of all-size firms will feel the urge to take back more control. They’ll reclaim decision-making responsibilities that they had delegated, become too reliant on consensus or over-innovate.
My advice to business owners during challenging and uncertain periods is to stay the course—whatever that course is for your firm. When you feel the itch to change the plan, resist it. Instead, set a goal of re-connecting with your people and your clients. Take the time to ask questions, listen and learn.
We're in an undeniably challenging period, and it’s been an awakening after a decade-long bull market. But these are the situations from which the greatest leaders emerge. These leaders understand that growth isn’t usually a straight line. It has stages, and they allow each stage to pass, they let the cycle run its course, and they stay connected with the basics of growth.
Angie Herbers is the founder and CEO of Herbers & Co, a consultancy firm for financial advisors.