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Setting objectives and a realistic fee structure

In the second part of our interview with Chris Baigent-Reed of business consultancy Jigsaw Tree, we look at the actions to take once the initial review of the firm’s operations has been made, including setting individual objectives, bringing in operational management and establishing a realistic, i.e. profitable, fee structure.

ABR: Once the overarching review of a business has taken place, you recommend setting SMART objectives. What do you mean by this?

CB-R: When we set the strategic goals of the business we ensure that there are appraisals or review processes undertaken with everybody in the firm. As part of those review processes everybody will be set SMART objectives. SMART stands for Specific, making sure that people are really clear as to what they need to do for the business; Measurable, so they have KPIs sat around those specific behaviours; Attainable, because there is absolutely no point setting somebody something that they are never going to achieve, it will simply have a de-motivational effect; Relevant to the role and Timed, so there is a defined point when the objectives will be accomplished.

This is about making people accountable for what they do and with complete clarity and transparency as to what the business requires of them. In doing so, we are making sure that the individual objectives tie in with the corporate objectives.

ABR: Do people respond positively to having those objectives set down for them?

CB-R: Yes they do. If they’ve not had something in place, or they’ve had something in place that hasn’t worked particularly well, they are quite open to having that transparency as it takes away any element of uncertainty for the individual so that they are clear what is required of them.

When I work with firms I talk about the quadrants people work within, as outlined by Stephen Covey. In my words, those quadrants are: Urgent, Forward Planning, Distraction and Waste of Time.

We work with those quadrants in mind to make sure that people spend most of their time in either what’s urgent or enabling them to forward plan for the business, and that’s critical to making sure that people are operating efficiently.

ABR: What behaviour do you see in businesses that fits within the other quadrants, Distraction and Waste of Time?

CB-R: A lot of firms may find that staff spend too much time in the distraction and waste of time quadrants. For example, when people ask you to do work to help them to achieve their objectives but it doesn’t help you work towards your goals. We all have to be focused and balanced in our approach to these quadrants.

ABR: How have you seen the business review process flow through into better client outcomes and better run and more profitable businesses?

When we review a firm’s operations we make sure that the client is central to all of a firm’s processes, which of itself will invariably help deliver better service. By making sure staff are accountable you’re almost empowering them to achieve their objectives. This gives the firm transparency in terms of the service that it is providing and, importantly, how it is able to evidence that service to the regulator.

And by reviewing and streamlining their processes, firms find that in turn they are better run and more profitable. For example, it may be that the owners of the firm were thinking about taking on board another paraplanner but because we’ve enabled them to either better use technology or to realign the organisation to be more efficient, they have found there hasn’t been the requirement to take on that extra person. It may be that having been through the review process we’ve been able to better utilise people across the organisation, or the decision has been made to outsource an element of the workload, which has helped increase the efficiency of the business while incurring lesser cost than hiring a new member of staff or without incurring further cost at all, so building more profitability into the business.

ABR: Are you seeing firms create new roles to help drive the business forward – operations manager, for example?

CB-R: It is absolutely critical for firms to have the right type of operational management to ensure that the business works efficiently. But it’s not a question of just thinking, we need an operations manager. You have to look at where there are the gaps in your organisation and where a new role would best serve it. Then you create the role, interview and recruit into that role. That sounds simple but acta lot of firms don’t do it in that order. Often firms don’t have the recruitment structures in place or the owners/directors are so emotionally linked to their business that they find people they like and that they think can fill the gaps in their organisation but actually they don’t fit, and that can cause issues for the business.

To get the right person when recruiting, in my opinion, competency-based interview skills are key. I think firms should be looking at some form of psychometric testing as well, to make sure that the person being interviewed will fit the role and the firm, in terms of whether they are team player, a complete finisher, and what attributes they bring to the business.

ABR: Finally, fee setting has been a keen issue for adviser businesses. What’s your advice to firms looking to establish a realistic, i.e. profitable, fee structure?

CB-R: Firms need to do a time and motion study if they are to accurately assess and charge the fees they need to run their business. I remember attending a conference where they asked firms to assess what their hourly rate would be if they took everything they do and that cost them into account. The firms were woefully out of kilter with the real cost of providing service to their clients.

A fee level needs to be set that properly rewards the firm for its professionalism; the expertise and skill, work and effort that is put into its clients’ accounts. But the only way you’re going to know how much providing service to a client really costs a business is to carry out a time and motion study. With that information, firms can also better align their service proposition to what the client wants and can expect to receive from the firm for the fee they are willing to pay.

Firms also have to ensure that the amount that is being invested into the future of the business is right in terms of what the cost would be to service that client on an ongoing basis.

There are firms that charge 1% implementation and 1% ongoing, while other firms work on a time-cost basis and charge a fee according to the time that’s spent working for the client. Whichever route is taken, the actual figures have to be aligned to what it costs to run the business and for every business that is going to be very different. Which means that the only way for a business to set its fee level is to look at what delivering the service is actually costing the business, decide the service level it wants to provide going forward and to set its fees accordingly. Otherwise you are not going to know if the business will continue to be profitable?

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