Most Managers Should Come From The Inside
There is no reason why some (or many) of the managers in a firm should not come from “the outside.” Professional managers bring specialized knowledge and experience and will help the firm make better decisions. However, imported management has to be balanced by the involvement of the partners and managers who have been grown internally.
If most of the management of a firm comes from the outside, the firm will have an inevitable conflict of values—a conflict that is detrimental to its future. There is a lot of merit in management consisting of people who sit in client meetings and interact with clients daily. In fact, the greatest competitive advantage of independent firms may very well be that the owners and managers of the firms are the advisors of the firms. This means that everyone making decisions has a very clear and recent view of what really matters to clients and what is in the best interest of the client.
If the management of the firm consists mostly of “non-advisors” it becomes very easy to rationalize decisions that promote efficiency but destroy relationships. Such examples are many—from giving small clients a 1-800 number to call (rather than the advisors directly), to over-streamlining portfolios, to outsourcing planning, etc. These may all be good bottom line decisions, but they are very poor client decisions. The voice of practicing professionals in management will provide that balance between efficiency and client interest.
Not every partner wants to manage and not every partner is a good manager, but I will argue that every partner should be involved in management at least to some degree. Managing is like parenting—if you are not involved, you will likely have deep issues with the outcome. You can certainly ask others to participate—there will be teachers and babysitters involved—but at the end of the day, few people will argue that raising children is “best left to the professionals.” Granted, none of us likes to change diapers or discipline children, but if we miss too many of these unpleasant moments, we will not have that deep connection with the result.
Management skills can be acquired, and it is the responsibility of every firm to train its partners how to be managers or at least how to participate in management. In large accounting and consulting firms, such training begins very early in the career path and firms should systematically introduce their future partners to all aspects of running the business. Moss Adams LLP, the firm I grew up in, starts to assign some management responsibilities to professionals at their first promotion.
Participating in management is not a distraction for the partners of a firm—it is part of the experience of being a partner.
“Participation,” of course, is a very broad term. It may mean dedicating a significant amount of time to work or it may mean simply staying informed and providing input when needed. It is very impractical to have every partner involved in every decision all the time. All I am arguing is that a good firm should make sure that each partner participates in at least one management committee, that each partner should have some employee responsibilities and that each partner should follow the work of the “management” of the firm.
Professional management can be very helpful in a firm, but if a car only has “professional drivers,” it becomes nothing but a taxicab.
A Firm Needs Leaders
To be successful, a firm needs not just managers but also leaders. A firm should be governed by a vision—a sense of direction that allows for thoughtful long-term use of resources.
That vision should be complemented by a statement of values and purpose for the firm—one that not only says where the car is going but also why it is going there. The answer to those questions should come from the group of owners/partners to be credible.
While importing management is possible and perhaps productive, importing leadership into a relatively small organization is almost impossible without some significant disruption. Leadership speaks not only to the business plans and use of resources but also to the mission of the firm.
The same is true for a wealth management firm. Chances are the majority of the employees have been long-term members of the team. The founders of a successful firm have also likely left a powerful mark on the firm in the form of their values and the goals they had for the firm. The shared experiences of the staff become the “mythology” of the firm that carries a special importance.
Without sharing that experience and that history and being part of that mythology, the future leaders of the firm will have a hard time establishing their own credibility.