Beverly Flaxington is a practice management consultant. She answers questions from advisors facing human resource issues. To submit yours, email us here.
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Dear Bev,
We do performance reviews for our staff every year. I do not believe performance should be directly linked to bonuses –they are different topics. But my COO says that we should divvy up the profit pool based on everyone’s performance. Who is right?
Doug T., Ohio
Dear Doug,
Your question has a number of components to it. How clearly defined is your bonus pool? In other words, how do employees think the pool is calculated? It is worrisome to me that you and your COO have different opinions, so I would imagine that your staff is a bit confused too!
It’s critically important, when it comes to salary and bonuses, that employees know exactly where they stand and what they need to do to achieve certain levels of success. I’ve seen far too many cases where employees become disgruntled because they believe they met all of the requirements, but they did not receive the coveted bonus amount.
You and your COO should set specific targets – mostly quantitative so they are measurable, but some qualitative to show what you value as a firm in terms behavior. That should be separate and distinct from the performance review process. Do this before you do anything else – set clear goals so employees can measure themselves and know whether they have achieved success or not.
Next, look at your performance-review process. Employees should be given feedback on what they have accomplished – both good work and areas for improvement – separately from what they will earn as a bonus. I agree with you on this one, but with the caveat that the bonus situation is first cleared up and managed well. The performance review process should allow you and your managers to give clear feedback on what an employee has done well, and where they need to improve. Do not offer a general: “You need to communicate more effectively,” but rather specifics: “In the meeting with the Thomson family, you did not talk about our investment process in detail. As the investment expert, I would like to see you sharing this in every client meeting.” The more specific you can be, the better the chance the employee will modify their behavior the next time around. Do this for things that need to be improved, like my example, and for things the employee has done well: “I appreciate how you always have a clear agenda for our weekly meetings; it helps me to focus on what we need to talk about.”
We love to know someone is paying attention and watching what we’re doing right!
Dear Bev,
We are located in an at-will employment state. I can fire my staff at any point in time. My compliance officer, who is also a lawyer, is adamant that I need to do performance planning with staff I am planning to fire. I think this is a waste of time. These employees are not in a protected category.
Name withheld
Dear Advisor,
You putting me in a position of dismissing something that your compliance officer has said. That is risky for both of us! I am not a lawyer and I don’t know employment law – but I have had the unpleasant experience firing dozens of people throughout my career.
Your question is the difference between what’s “legal” and what is “right”. You are on solid ground with your assumption that you have a right to fire these people at any point in time, but I am going to side with your compliance officer because I believe that employees deserve feedback about what’s working and what’s not.
I have found, far too often, that advisors think a new person will make all of the difference in their firm. It’s about “finding the right person,” not figuring out what went wrong with the person that you have. You may be right – the person or people you want to fire may not work out in your firm, but have you given them every chance to modify their behavior for success? Do they know what’s wrong? Have you talked with them directly? Have you put them on a performance warning? Do they know exactly what success looks like? According to Topgrading, a book about the cost of a bad hire, firms lose up to 27-times the salary when an employee doesn’t work out.
Before you pull the proverbial trigger, make sure you have given your staff every chance to make it work.
One caveat – if you are doing this for downsizing purposes, or to save money, that’s another situation entirely. You can eliminate these roles and downsize without much warning – as long as you don’t hire someone else into that same role. I have seen firms use downsizing as the excuse because they don’t want to deal with the performance management process I outlined here. That’s unfortunate –you should care about your firm’s reputation and want the employees who leave to feel good about how they were treated on the way out.
Beverly Flaxington co-founded The Collaborative, a consulting firm devoted to business building for the financial services industry in 1995; in 2008 she co-founded Advisors Trusted Advisor to offer dedicated practice management resources to advisors, planners and wealth managers. She is currently an adjunct professor at Suffolk University teaching undergraduate students Leadership & Social Responsibility. Beverly is a Certified Professional Behavioral Analyst (CPBA) and Certified Professional Values Analyst (CPVA).
She has spent over 25 years in the investment industry and has been featured in Selling Power Magazine and quoted in hundreds of media outlets, including the Wall Street Journal, MSNBC.com, Investment News and Solutions Magazine for the FPA. She speaks frequently at investment industry conferences and is a speaker for the CFA Institute.
