Hiring Your Boss: Do You Need a CEO? - Business Management for Financial Advisers

Unfortunately, most financial advisers have little or no training or background in business management, so they’re forced to hire from the outside. But practitioners who do hire a CEO are often disappointed with their hiring decisions. It’s difficult for most owners of advisory firms to give up the strategic leadership role in their business.

That’s why firms rarely succeed when they hire a full-time CEO who has no role in client service or development. It’s virtually impossible emotionally for advisers to surrender the responsibilities of leading the firm. However, professional management is important whether it’s the responsibility of the owners themselves or of outside hires.

Depending on the size of the firm, the position could be a general manager or a chief operating officer (COO). As chairman and CEO of the practice, the individual reports to the owner, who most likely is the founder or one of the lead advisers. The general manager’s role is to be accountable for implementation of financial management, operations, information technology, and human-capital strategies within the firm.

Occasionally, depending on the size of the firm, he or she may also be responsible for sales and marketing. The key concept is that the manager makes sure the infrastructure of the firm is operating efficiently, effectively, and productively.

Some common complaints about the CEOs they’ve hired:

  • It costs too much for management; I could do what he (she) does.
  • We’re paying too much for what we get.
  • She’s trying to create a strategy that I’m not comfortable with.
  • He’s making decisions unilaterally.
  • She will not handle details.
  • He will not address the big strategic questions.
  • She has poor people skills.
  • We cannot get the reports we want and need.
  • He has no sense of urgency or priority.
  • Her answer for everything is to hire more staff.
  • He cannot deal with conflict or difficult situations.
  • She wants to renegotiate her contract.
  • He says we are not clear in what we want from him.

Common Mistakes in Hiring a CEO

Although some of these observations are likely true, the core of the problem is a hiring issue. Too often, the person hired for this role was chosen based on the impressiveness of the résumé and (especially) big-company experience rather than on any specific qualifications to run a small, financial-services business.

In their book Navigating Change: How CEOs, Top Teams, and Boards Steer Transformation (Harvard Business School Press, 1998), Donald Ham brick, David Nadler, and Michael Tushman suggest that the role of a CEO falls into three broad categories:

  1. Envisioning. Successful CEOs share an ability to articulate and communicate a vision of the organization that captures the imagination of the people they lead.
  2. Energizing. Effective CEOs energize their people by continually and publicly demonstrating their own sense of personal excitement and total engagement. They consistently convey a sense of absolute confidence in the organization’s ability to achieve the most challenging goals.
  3. Enabling. Effective CEOs find realistic ways to give people the confidence, authority, and resources they need to work toward their shared objectives.

If you examine these roles, you begin to realize that either these are the functions you personally are supposed to perform as the leader of the business, or you have to have the self-confidence to vest your new leader with this authority. More important, you have to decide if what you’re looking for is truly a CEO or just a general manager to perform the management and personnel tasks that you would rather not do.

Many hires within financial-advisory practices occur because the owner stumbles on somebody who has become available. This mistake happens with all positions. Rather than thinking about what the organization should look like to better achieve its goals, owners react to perceived opportunities because the résumé is so impressive. Indeed, advisers often exhibit a bias toward hiring based on seductive résumés touting advanced degrees and big-company experience. The process should be more deliberate:

  • What are the responsibilities that I want to delegate?
  • Where are the leadership gaps that are impeding the firm’s progress?
  • What level of revenue must I generate to support this position?
  • How will I know I’ve hired the right person, or how will I know if I’ve hired the wrong person?
  • What characteristics must the person have to improve my practice?
  • What job experiences or education does the candidate need for this role?

Failure to interview properly: It’s essential to probe for real insight into an individual’s makeup, aptitude, motivation, interests, and personality. Literally hundreds of psychometric tools are available that serve as useful sources of insight and information into how individuals are likely to perform their jobs.

It’s not as important to hire the most intelligent people as it is to hire folks who have an aptitude or ability to quickly learn in the areas in which you want them to be strong. In particular, you need to evaluate their general abilities as well as their ability to work with numbers, words, or concepts.

One of these may be more important than the others. It’s important to evaluate what motivates them—people, data, or things. In other words, do they tend to be more social or more attached to their computers? Are they hands on or hands off?

It’s important to evaluate personality to ensure the candidate fits your benchmark for the position and is compatible with the culture you’re trying to create. Failure to establish measurable criteria for evaluating performance and to tie compensation to expectations: Being clear about what you expect your CEO to accomplish is vital both to the hiring process and to your ongoing management efforts.

If you do not know specifically what you want someone to do, how can you know if you’ve found the right person? Sure, part of a CEO’s job typically is to help devise a strategy for your business and then to build the team to implement it. Those are specific tasks that require specific skills. But as the owner, you can’t delegate all strategic planning to a CEO; you need to have a clear vision of where you want the business to go.

At this point, your challenge is to decide whether you should serve in the management role, the leadership role, or both. Between your vision for the practice and its fruition lies a long shadow: a shadow of doubt, of ability, of time. If your time is better spent on client service or on business development, then try not to let your ego get in the way of effective management.

If the role is not for you, come clean and focus your talents where you can make the greatest impact on your business. But if you engage professional management or delegate these duties to others within your firm, you may need to work on keeping your reactions in check. If you hired well and were clear about your expectations, you’ll be far better off allowing your managers to do their jobs than to insinuate yourself into the minutiae of their decisions.


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