Who Wants To Be In Charge?

Derek Underwood was one of the great England spinners. He was once asked if he would be putting himself forward for the vacant England cricket captain position. His answer was simple. “No. Why on earth would I want to do that?”

We’ve all seen the top salesman who gets promoted to sales manager and has no people management skills. Great talents and great leadership skills do not necessarily go hand in hand.

In my experience of several cricket clubs, the captain is often the person who didn’t turn up to the AGM and got voted to the position in their absence.

It is a genuine mystery to me why so many people want to get into management. Many, maybe even most, small businesses are set up by people with an idea and/or a vision, a way of doing things better. As their business grows, they are forced to learn new skills, to do things that may not be natural to them.

An oft quoted business advice saying is ‘work on the business and not in the business’. But what if you don’t actually want to be the boss, with the ensuing responsibilities such as having to deal with staff problems? What if making widgets is actually all you want to do?

I know of one business owner who employed a Managing Director and then continued to work on the shop floor. It’s important in any business to match the skills required to do a job to the skills of the person doing that job. Seems obvious, but how often does someone fall into a role because no-one else would do it, or because they happen to own the business?

Which begs the question – who is the best person to run an adviser practice? Does the MD have to be an authorised individual? Some people in our industry seem to feel that ceasing to be an adviser in order to run a business is somehow arrogant. I think it’s perfectly logical, if that’s where the individual’s skills and enjoyment are. There are more and more practices where the advisers have got together and chosen one to manage the practice, allowing the others to focus on advising.

What do you think?

Chris Budd has published his first novel, A Bridge Of Straw Рmore info here 

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12 thoughts on “Who Wants To Be In Charge?

  • Good post Chris,

    I think a possible issue here may be cost? If a small firm employs somebody to run the business and that individual is a non fee earner, they become a cost borne by the fee earners.

    This could be why you see lots of advisers also being compliance manager, office manager, marketing manager as well as the day job of seeing clients and writing reports.

    This then begs the question as to how effective someone can be if they are doing all of these roles?

    For a small one or two person firm, it wouldn’t make sense to employ 4 or 5 people for these roles as the cost far outweighs any benefit, but there is presumably a critical mass that once reached makes it sensible to look to employ others for these roles, and if everyone is effective at their given roles the business should prosper as a result, knowing when this critical mass has been reached though, and taking that leap of faith is very difficult.

    I agree that there will be a number of individuals that will have management responsibilities that they are not comfortable with and don’t want, but I also believe there are individuals who just want to run the business, make strategic decisions and take responsibility for its direction but are in the position of having to advise clients (earn fees) in order to be able to do that.

    We see the same in accountancy firms and law practices, the managing partner still has to maintain their fee income and take on the extra responsibility of leading the firm.

    I guess this may act as a safety net for those moving into these roles. If it all goes wrong they still have their fee income and advisory role to fall back on and they are less of a burden on the other fee earners / partners.? But again are they being as effective as they could be if they could just concentrate on running the business ?

    Reply
    • Two comments, if I may Russ. Firstly in a fee based firm everyone is a fee earner. All our admin staff have chargeable rates and recovery ratios.

      Secondly, the theory would be that if one adviser concentrates on managing the business, the other advisers can focus on seeing clients. No good in a 1 or 2 man firm, as you say, but a good MD shouldn’t be a burden on the ‘fee earners’, the total fee income should increase as a result of effective management.

      Reply
  • I think the main problem we have here is the mindset shown in Russell’s comments. The concept that others in the business are a ‘burden’ on the fee earners.

    This mindset is all about the business being built to support the Advisers first and foremost, not to attract and deliver a service to clients by the whole firm.

    Adviser Centric is fine. But we then should not wonder why there is no leadership within the firm, why delegation is difficult, why there is no long term underlying value, why Advisers are free to do things their way, and create liabilities and inefficiencies for others. You can only get away with this by staying small. A classic lifestyle firm.

    So to grow, to be sustainable, to have a value and to have a succession plan, someone needs to be in charge. To follow Chris’s thoughts, it’s all very well for a bunch of amateurs to not have a leader in their team out on the field. It’s another for what aspires to be a commercial enterprise with staff and clients depending on it to bumble through the way many firms have.

    We need a change in mindset.

    Reply
  • I agree Phil, mindset is a big issue. Just to clarify, my point was that I think this mindset exists, I wholeheartedly agree that an effective MD is an asset to a business but I think the reason we don’t see more of it is due to these misconceptions.

    Reply
  • As our industry evolves and recurring income becomes the bedrock of any sustainable business then the historical importance of the hunter over the farmer will reverse.

    A business has to deliver a constant value and will need a team – numbers not relevant – to ensure that clients continue to feel that they are getting value for their on going payments to a firm.

    In future our industry will not remotely resemble the transactional nature of a lawyers or accountants business – thank goodness – and will need to ensure that all staff are capable of adding to the value which will be in demand from clients.

    Reply
  • This is an interesting debate. Within my own firm, I spent a year (actually, longer but officially just a year) where my role was solely that of MD and I was not registered to provide financial advice. It’s still rare to see a full-time MD in IFA firms, but I’ve heard of one or two examples.

    A serious, growing business should have clearly defined roles which are (ideally) separate. Scale and capacity is important in this respect; as Russ mentions above, a one or two man firm could probably not justify a full-time MD.

    In the past month I’ve returned to an advisory role, but not a full-time advisory role as 80% of my time will still be devoted to business management, operations, marketing, PR and research. This has become possible because a) we have become efficient enough to allow it to happen, and b) I wanted to do it (and I’m the business owner)

    What we will continue to do is separate out our day jobs (IFA, Paraplanner, Administrator, etc) and our board functions (MD, Finance Director, Marketing Director, etc) and set aside clearly defined times to carry out each role. This prevents my MD role from leaching into my IFA role, and trying to wear two different hats at the same time.

    Reply
  • I agree Phil, mindset is a big issue. Just to clarify, my point was that I think this mindset exists, I wholeheartedly agree that an effective MD is an asset to a business but I think the reason we don’t see more of it is due to these misconceptions.

    Reply
  • Good post Chris,

    I think a possible issue here may be cost? If a small firm employs somebody to run the business and that individual is a non fee earner, they become a cost borne by the fee earners.

    This could be why you see lots of advisers also being compliance manager, office manager, marketing manager as well as the day job of seeing clients and writing reports.

    This then begs the question as to how effective someone can be if they are doing all of these roles?

    For a small one or two person firm, it wouldn’t make sense to employ 4 or 5 people for these roles as the cost far outweighs any benefit, but there is presumably a critical mass that once reached makes it sensible to look to employ others for these roles, and if everyone is effective at their given roles the business should prosper as a result, knowing when this critical mass has been reached though, and taking that leap of faith is very difficult.

    I agree that there will be a number of individuals that will have management responsibilities that they are not comfortable with and don’t want, but I also believe there are individuals who just want to run the business, make strategic decisions and take responsibility for its direction but are in the position of having to advise clients (earn fees) in order to be able to do that.

    We see the same in accountancy firms and law practices, the managing partner still has to maintain their fee income and take on the extra responsibility of leading the firm.

    I guess this may act as a safety net for those moving into these roles. If it all goes wrong they still have their fee income and advisory role to fall back on and they are less of a burden on the other fee earners / partners.? But again are they being as effective as they could be if they could just concentrate on running the business ?

    Reply
    • Two comments, if I may Russ. Firstly in a fee based firm everyone is a fee earner. All our admin staff have chargeable rates and recovery ratios.

      Secondly, the theory would be that if one adviser concentrates on managing the business, the other advisers can focus on seeing clients. No good in a 1 or 2 man firm, as you say, but a good MD shouldn’t be a burden on the ‘fee earners’, the total fee income should increase as a result of effective management.

      Reply
  • This is an interesting debate. Within my own firm, I spent a year (actually, longer but officially just a year) where my role was solely that of MD and I was not registered to provide financial advice. It’s still rare to see a full-time MD in IFA firms, but I’ve heard of one or two examples.

    A serious, growing business should have clearly defined roles which are (ideally) separate. Scale and capacity is important in this respect; as Russ mentions above, a one or two man firm could probably not justify a full-time MD.

    In the past month I’ve returned to an advisory role, but not a full-time advisory role as 80% of my time will still be devoted to business management, operations, marketing, PR and research. This has become possible because a) we have become efficient enough to allow it to happen, and b) I wanted to do it (and I’m the business owner)

    What we will continue to do is separate out our day jobs (IFA, Paraplanner, Administrator, etc) and our board functions (MD, Finance Director, Marketing Director, etc) and set aside clearly defined times to carry out each role. This prevents my MD role from leaching into my IFA role, and trying to wear two different hats at the same time.

    Reply
  • As our industry evolves and recurring income becomes the bedrock of any sustainable business then the historical importance of the hunter over the farmer will reverse.

    A business has to deliver a constant value and will need a team – numbers not relevant – to ensure that clients continue to feel that they are getting value for their on going payments to a firm.

    In future our industry will not remotely resemble the transactional nature of a lawyers or accountants business – thank goodness – and will need to ensure that all staff are capable of adding to the value which will be in demand from clients.

    Reply
  • I think the main problem we have here is the mindset shown in Russell’s comments. The concept that others in the business are a ‘burden’ on the fee earners.

    This mindset is all about the business being built to support the Advisers first and foremost, not to attract and deliver a service to clients by the whole firm.

    Adviser Centric is fine. But we then should not wonder why there is no leadership within the firm, why delegation is difficult, why there is no long term underlying value, why Advisers are free to do things their way, and create liabilities and inefficiencies for others. You can only get away with this by staying small. A classic lifestyle firm.

    So to grow, to be sustainable, to have a value and to have a succession plan, someone needs to be in charge. To follow Chris’s thoughts, it’s all very well for a bunch of amateurs to not have a leader in their team out on the field. It’s another for what aspires to be a commercial enterprise with staff and clients depending on it to bumble through the way many firms have.

    We need a change in mindset.

    Reply

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