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The State of the Firm: An Annual Review for Owners and Employees

Getting everyone on the same page can improve your operational efficiency as well as motivate and re-engage employees.

Helen Modly and Tommie Monez, 02/09/2012

Sometimes you just have to wonder whether you are using your staff and other resources as effectively as possible. You can't just assume that they understand the economic realities of your firm and how they contribute to your success. It's time to create a formal process.

Small firms tend to start out with one or two principals, a healthy dose of optimism, and maybe a support person. New employees get layered on one at a time as the firm reacts to structural stress. As the organization grows, you end up with a collection of employees who joined under different circumstances rather than an integrated staff that share a common understanding and vision. Getting everyone on the same page can improve your operational efficiency as well as motivate and re-engage employees.

Ask yourself these five important questions:

• Does your staff understand the firm's goals and the obstacles to success?
• Do they understand what role they play in the firm's success?
• Do they act and feel like they are part of a team?
• Do they show that they feel valued, respected, and appreciated?
• Are you getting the most out of your investment in your employees?

One way to accomplish this is by holding an annual "state of the firm" meeting in which the firm's goals are articulated, and everyone's roles, rewards, responsibilities, and work flow are reviewed. Owners of small firms wear a lot of different hats, and it can be hard to set aside time to work on the business of running the business, but the rewards can be significant. Pick a day no more than six weeks out and put it on the calendar for all employees. Start the meeting in the morning and bring in lunch if necessary to complete the process in one day.

Getting Ready for the Meeting
Decide if you need to hire a facilitator.
A facilitator can help keep the meeting on track and ensure that everyone gets a chance to be heard. Using an outsider to run the meeting can keep management from dominating and allow for a greater exchange of ideas. Facilitators are particularly useful if there are serious communication problems, significant changes in job functions or personnel, or the firm is changing its direction or focus. Costs can vary widely depending on whether or not the facilitator is tabulating and reporting results. Expect to pay anywhere from $300 to $5,000. If there is someone in the organization who has experience and can effectively serve as the facilitator, then you may be able to avoid this expense.

Distribute a questionnaire. Have all stakeholders (active owners, managers, advisors, and staff) complete an open-ended questionnaire. Good questions include:

• What do we do?
• How do we do it?
• Why do we do it this way?
• What do you do?
• What is your most valuable contribution to the firm?
• What tasks or responsibilities would you like to get rid of if you could?

Ask everyone to write their own job description as they understand it today and how they would like it to be.

Take a test. Assessment tools such as the Kolbe Index are easy to use and can be taken online. They measure a person's instinctive way of processing information, dealing with risk and uncertainty, and decision-making style. This knowledge can be used to highlight potential problems, correct mismatches in the staffing of job functions, and lead to increased productivity. Conflicts can often be minimized or resolved by acknowledging differences in style and instinct. This has been invaluable in our firm, allowing us to rearrange job assignments and to recognize and even joke about our different styles rather than allowing frustration to build. The basic Kolbe test costs about $50 per report. The report that consolidates the results is also around $50.

Schedule a management meeting. For small firms, active owners and all managers should have at least one preliminary meeting to plan the firmwide meeting. First, you will need to identify and articulate the firm's short-term and longer-term objectives. Initially, we used a brainstorming format for this, but discovered that stronger personalities were stifling quieter voices. Now we ask each participant at the preliminary leadership meeting to submit their thoughts on our objectives prior to the meeting. All are written anonymously on easel boards in the meeting room just before the meeting starts. By consensus, we narrow this down to no more than three short-term and three long-term objectives.

Next, review all the questionnaires and, starting with the leadership team, discuss the responses and job descriptions. Unless the people running the place are clear on their roles and responsibilities, no one else has a prayer of being clear on theirs. It is common to find gaps and overlaps among the leaders in a small or midsize firm, but understand that they cause inefficiencies and confusion. Strive to develop clear descriptions of your roles and identify which staff members should consider you to be their primary supervisor, responsible for their assignments and performance evaluations.

Last, review the staff questionnaires. If you discover that your staff is unclear about your value proposition, or how you deliver it, you have some work to do. If everyone is basically on board, then focus on each position. Prior to this part of the meeting, we usually pause for a break. At this point, using one easel per staff position, someone will post the staff member's current and desired versions of their job description. Then each member of the management team starts at a different position and adds comments, suggestions, clarification, and ideas to that position board, rotating until all positions have been covered.

One by one, we discuss each position and the comments. While we consider the person filling that position currently, we also discuss the fit between the person and the position. This scrutiny will often reveal gaps in responsibility that lead to bottlenecks in workflow, responsibilities that should be shifted or could easily be combined, better use of talent, need for additional training or outsourcing, and a host of other discoveries.

The Meeting
The first meeting will probably take most of a day, but the process will become more streamlined in time. Stick to the agenda and establish ground rules. This is not a gripe session, nor is it a brainstorming session. Most of the content will be delivered by various members of the management team, although everyone's comments are welcome. Present this as more of a firmwide strategic planning session. This is a recent agenda from our firm's annual meeting:

Firm Overview
• Describe the culture (values and atmosphere) that we want in the office.
• Describe where we were last year and where we are this year (number of employees, new software, changes in assignments, expansion of office space, etc.).
• Describe our targets for the coming year in the same categories.

Firm Self-Study
• What is our value proposition to clients?
• Who is our ideal client?
• What are our unique strengths?
• What are our weaknesses?

Client Experience
• What do we want the client experience to be like?
• How do we structure our roles to create the best possible client experience?
• What do the clients really want?
• Who are our clients and where do they come from?

Roles and Responsibilities
• Review the organization chart.
• Present and discuss each job description.
• Discuss how priorities are established if reporting to more than one person
• Elicit ideas on increasing collaboration across positions and eliminating identified gaps and bottlenecks in workflow processing.
• Discuss training needs.
• If new positions are to be created or vacant positions filled, be sure your staff understands what talent you need.

Annual Budget & Profit Sharing
• Review firm gross revenue by source for the past three years.
• Identify sources of new clients or additional client assets.
• Review terminated clients or assets withdrawn over the past three years.
• Review market impact on AUM over the past three years.
• Discuss new business goals for the coming year and the plan to meet them.
• Discuss incentive pay programs and the bonus plan for employees who bring in new clients.

Follow Up
What do you do with all of the information that has been gathered? The meeting is just the beginning. The next step is to summarize the results and come up with an action plan for work flow improvements and reassignment of work load and job functions, if necessary. Develop your marketing plan so that it focuses on the ideal client and the most productive referral sources, and share it with your staff. Set a schedule for implementation and put it on the calendar.

There is no need to reinvent the wheel each year. The assessment tests need only be taken once, and new employees can have their results added to the group report. A professional facilitator may be used initially but may become unnecessary as time goes on.

The reward for this large investment in time will be an increased understanding of what makes the firm profitable, how each staff member contributes to and shares in that profit, and a team purposefully pulling the wagon in the same direction.

The author is a freelance contributor to MorningstarAdvisor.com. The views expressed in this article may or may not reflect the views of Morningstar.

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