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It is one thing to attract talent to your firm, it is quite another to attract successors with the right talent though. Many financial advisory firms see the need to create leverage and handle their own succession issues through recruiting new advisory talent but struggle to do it successfully.
The main reasons why recruiting the right advisers for the future of the firm often results in frustration for all and a parting of the ways is usually because the big issues were not thought about and addressed at the outset. Perhaps the main reason however is because firms mistakenly think the issue is “keeping talent”, whereas the real issue is “growing talent”.
The big issues that do not seem to get thought about adequately are:
- Understanding the difference between what attracts talent, and what keeps talent
- Laying out a development pathway
- Rewarding the growth behaviors
All 3 are inter-linked of course, and a great recruitment and retention strategy must get all 3 elements right. Get them REALLY right and there is a very good chance you can attract and grow your successors.
At its most simple; great talent is attracted by opportunity. Great talent is retained by equity. The transition from great talent to perfect successor therefore must have an evolving remuneration and recognition model.
At the outset the standard offerings of an attractive pay-packet and a cool corner office is usually not enough to get the right talent. They want opportunity. Opportunity in the form of learning, growing, being put in front of clients or being shown how to attract the right sort of clients in sufficient volumes…the right talent wants the opportunity to master the business. Putting food on the table and having a compensation plan which achieves that does matter of course, but without the right opportunities being delivered as part of the deal a firm will only attract those who are chasing the pay-packet. They usually are not the right talent for the firm. And if only a good pay-packet is provided, albeit with a cool office, great talent will leave for better opportunities.
So you must understand (and be able to articulate) what the opportunity is that your firm provides for the aspirational?
The second part of getting the recruiting strategy right is understanding how to keep the talent. There is little in this business that is more frustrating than hiring a talented person and then investing countless hours and dollars in developing them, before watching them depart to join a competitors firm. Having that happen over and over is also incredibly expensive and inefficient.
More often than not it is because the promised opportunities were not delivered as expected, or not delivered at all.
Provided the promised opportunities were being delivered though and the talent still left, it usually comes down to one of 2 things:
- The remuneration model was not evolving with (and rewarding) the growth in skills and capability
- Lack of recognition for the milestone achievements
(often it is both of these things of course).
Great talent understands the concept of deferred compensation, or the concept of investment in themselves, so it is not simply a matter of being paid inadequately at the outset. They understand that it is worthwhile taking lower up-front compensation if there is a genuine opportunity to create significant capital. They understand the power of equity, and the future it can provide them. While equity is the big carrot that largely keeps great talent incentivised, motivated and in-house, there is also a need for a remuneration model which moves upwards with their increasing value to the firm too.
Providing equity to the talent doesn’t mean today’s principals have to give away their existing equity. We do need to outline a plan for how the talent either creates their own capital by staying the course with us, or show them how they can build equity of consequence inside the firm and how the transfer of ownership and responsibilities can unfold with their increasing contribution to creating a higher value firm.
Whatever the plan for making it happen though that future equity is what keeps the best talent in our firm.
This is where the development pathway becomes a critical step. We have to map out and show them what their development steps consist of…or how they get ready to become an owner. A simplistic example might be:
The detail in this example doesn’t matter in reality, because the pathway for a new recruit needs to be personalised. It is also a lot more complex to map out than this as it needs to be relevant to them. This example however comprises of a mix of academic learning, soft skills development, learning product and supplier systems, mastering internal business systems and processes, compliance and ongoing technical training together with acquiring the necessary business management capabilities.
The earnings and rewards must mirror the growing investment in capabilities, and for that remuneration/recognition model to evolve with them over their development (but I’m not giving away how to achieve that in a free blog post!)
Suffice to say that it needs to reward the behaviours that your firm values and the milestones which have been mapped out.
An “eat what you kill” compensation structure that is entirely commission for new product sales will, perhaps not surprisingly, encourage people to only focus on chasing sales. Equally, a salary for providing excellent service will result in someone who becomes reactive and helpful with customers, but not challenging customers by providing thoughtful advice and alternative paths forward. Why? Because they are compensated for keeping the customer happy, and the easiest way to achieve that is to agree with them and never ruffle feathers.
What you value is what you reward…
Getting the remuneration structure right – aligning the talent’s behaviour with our firms values and goals – is a matter of being very clear in the first instance about what matters to our firm. What do we value, and what does success look like to us? Then we can work out what behaviours and actions the talent need to exhibit in order to help achieve those goals while maintaining the values of the firm. THEN we can begin to work out how we might pay them for those necessary actions….
…THEN we have created the dream job for the people who are the right fit for our firm. And we have a good chance of keeping them and turning them into our successors.