Organizational Design: Align Structure with Strategy

Structure. Today, advisor/leaders may talk about “departments” within their firms. But the firm of the future, at least in more populated metropolitan areas, will be composed of the operations department, the financial planning department, the compliance department and the analytics department.

Regulation. Compliance and the need for oversight are here to stay. If anything, the issue is becoming more important. Given the current realities and trends, firms will need internal personnel to focus on this area. It’s a tough cost to absorb, perhaps, but eventually it will simply be a cost of doing business.

Considering these trends and the potential ensuing shifts in advisory firms’ organizational design, there is little doubt that the firms of the future will look different from the ones of today (and much different from the ones of the past). Many have noted that greater business acumen is going to be essential in the future. It’s not just that the changes are bigger, but that big changes are being introduced at a faster pace. Depending on your perspective, that’s either challenging or exciting.

What Could This Mean For You?
Regardless of the size of your organization, there is one component of organizational design that applies to every firm. The alignment of the right person with the right job is critical for everyone. As roles and responsibilities inevitably evolve, so must people. An employee’s inability to adapt makes him or her irrelevant, yet advisory leaders will likely hesitate to let such employees go and instead try to work around them.

Does all this talk about organizational design sound a bit corporate? It’s true that for some advisors—solo practitioners, advisors in rural areas or older baby boomers with “lifestyle” practices who intend to work indefinitely—the discussion may be moot. But for the youngest baby boomers, Gen X and Y advisors and older baby boomers looking to establish a “legacy” firm, the organizational design of their businesses will need to be at the forefront of their thoughts. Specifically, the future will require firms to be consciously designed so that structure reflects strategy.

A Conscious Design
The astute business owner will need to proactively design the firm according to future needs rather than inherit and assume the organization of the past. To accomplish this, a SWOT analysis (of strengths, weaknesses, opportunities and threats) can help an advisor assess the external industry landscape and competition, as well as how internal strengths and weaknesses may combine to influence strategy. Furthermore, advisors should assess the defined client base, including clients’ needs and wants and how these align with their firm’s mission and vision. The results of these analyses will provide the foundation for moving in a specific direction.

To be sure, there is no one right organizational structure for the industry to be copied by everyone. There is no structure that lasts indefinitely. But as firms become more sophisticated, the sophistication of their strategic approach must also develop. Sizable organizations need to attend consciously to this design. One thing is clear: The required skill set of advisor leaders in the future will include the competence to design and then redesign their organizations to align with their vision, client focus and strategy.