In my white paper "P4: Building Great Businesses by Creating Great Employees" (see "Let Go to Grow," Investment Advisor, November 2011), I suggest that traditional business management strategies don't work very well for independent advisory practices (and probably not for other small businesses, either).
In part, that's because most owner-advisors aren't trained to be business managers. But also, without the vast resources of large corporations that enable them to overcome individual deficiencies with sheer economies of scale, the success of small businesses depends far more on individual initiative and teamwork that focuses their limited resources to maximum advantage. In this smaller business environment, I've found traditional management techniques are not only far less effective, but they can actually have a negative impact on the success of a firm.
Here's how London Business School professor and author Gary Hamel described the problem with management in his December 2011 Harvard Business Review blog:
"Hubris, myopia and naïveté can lead to bad judgment at any level, but the danger is greatest when the decision maker's power is, for all purposes, uncontestable. Give someone monarch-like authority, and sooner or later there will be a royal screw-up," Hamel wrote.
He added: "In their eagerness to exercise authority, managers often impede, rather than expedite, decision making."
In advisory firms, I've had to deal with numerous problems caused by owners who want to manage—or micro-manage—their employees: that is, to closely monitor the way in which each employee works, to make every decision regardless of magnitude, to generate every new idea, and to initiate every new project or job. The consequences are many and destructive.
To start with, "hands-on management" sends the wrong message: Instead of training employees to think for themselves and figure out how to use their own skills and knowledge to achieve the desired result, it focuses on the manager and how she or he would do the job. This greatly restricts employees' willingness to exercise initiative or use their own abilities or judgment. The result is far less ownership of the result and a tendency to let the manager "do it for them."
What's more, too much managerial input and oversight often reduces employees' ability and willingness to work as a team by dampening both their individual creativity and a shared drive to do what needs to be done. By limiting employees' vision of success—both for themselves and for the firm—over-managers find they increasingly have to provide the driving force behind every aspect of the business. This is a draining and time-consuming role, especially in addition to being the lead advisor, rainmaker and business owner, and is a major factor in the high burnout rate among independent owner/advisors.
