Page 36 - Investment Advisor April/May 2023

3. REVIEW YOUR ORGANIZATIONAL firms that want to create the right com- consuming. Advisory firm leaders’ chief
STRUCTURE pensation structures must decide what pain point has always been a lack of
Organizational structure plays directly they want their growth to be. time, and creating a comp structure the
into compensation structure. It’s critical to be honest and realistic right way can help with this challenge.
Team-based ensemble firms will pay in setting that target. Deciding that you
their team members differently than firms want to double assets in two years, when 6. TAKE THE FINAL STEP
in which advisors are siloed, working you’ve never done that previously, is Once you’re clear on your firm’s core
strictly with their own books of clients. not helpful. What is helpful is to share values, service model, organizational
Also, team-based organizational a realistic growth expectation with structure, growth projection and career
structures tend to include paid salaries all employees, so they understand the tracks, how do you actually create your
and team-based bonuses, while firms opportunities in front of them. compensation structure?
with siloed organizational structures The answer may be somewhat hard
generally pay their advisors a percent- 5. SET UP CAREER TRACKS to believe, but two decades of consulting
age of the revenue they produce. Clearly defined career tracks can elimi- experience have proven its truth to me:
There are countless ways to design an nate upwards of half of the compensation- If you do the work described above, the

Showing employees an achievable pathway to career growth — the
extent of growth that they want and that you believe they’re capable
of — will help lead to a clear compensation structure aligning core

values, service models, organizational structure and career progression.

organizational structure, which means related questions that an organization proper compensation structure for your
there are countless ways to design a faces. Humans, by nature, want to grow. firm will become obvious.
compensation structure. But to find a Showing employees an achievable For example, if you’re clear that you
compensation structure that pleases pathway to career growth — the extent want to double your growth, then you
employees and facilitates the firm you of growth that they want and that you probably need to offer incentives related
want to build, it’s essential to know your believe they’re capable of — will help lead to business development. If you only
core values, your service model and how to a clear compensation structure aligning want your advisors to work individually,
the organization is structured. core values, service models, organiza- then you should pay them little or no
tional structure and career progression. base salary but rather compensate them
4. CLARIFY YOUR GROWTH GOALS These are the elements of the most effec- on the revenue they produce.
It may seem counterintuitive, but advi- tive and sustainable structures. If you want employees to serve the
sory firms that are growing more slowly Unfortunately, most advisory firms go clients that you already have, or to help
than their peers generally pay higher about the process of figuring out their you generate referrals, then you’ll prob-
compensation than those peers. compensation in backward fashion, ably want to pay a salary plus an incen-
Why? Because employees often want doubling their work. They start with tive. And if you’re content to run a
to be part of robustly growing firms. the question of what the comp structure slow-growing lifestyle practice with a
If a firm isn’t growing quickly — per- should be. few good advisors, you might as well pay
haps because its owner has no desire Later, when they realize that that high flat salaries.
to do so — then compensation must be structure isn’t working, they might focus None of these compensation details
increased to retain talent that is not able on creating career tracks. Career tracks can be determined, though, until you
to grow through a career track. don’t work, though, when growth goals become clear on your organizational
Fast-growing firms don’t need to pay haven’t been properly defined. issues. The clarity that you achieve in
the highest compensation because com- In such cases, leaders have no idea going through this process will help the
pensation generally rises in tandem with how to organize their teams. Finally, business succeed and deliver the best
growth; employees will stay and apply firm leaders bump up against culture service to your clients, all while simpli-
themselves if they know that they have and core values. fying your professional life.
the opportunity to earn a lot more down Backing into a compensation struc-
the road. ture in this way, while also dealing with Angie Herbers is an independent consultant to
After clarifying their core values, ser- your employees’ questions, concerns the advisory industry. She can be reached at
vice model and organizational structure, and complaints, is needlessly time- [email protected].

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