We all want to make the eight-figure exit at some point in our careers. But have you considered the role your firm’s culture plays in this journey? You see, company culture has the power to make or break any business. There’s this misunderstanding—especially in the financial world—that we can only achieve greater profitability by cutting costs. Friends, that’s just not true. In this entry, I will take a long look at the role your company culture plays in driving profitability.
Follow Along With The Financially Simple Podcast!
This week on The Financially Simple Podcast:
- (1:40) Defining Company Culture & its Impact on Your RIA
- (3:17) Culture in the Advisory Space
- (4:04) Firm Culture & What You Can Learn From Your Employees
- (6:55) Why Type of Culture Would the Buyer Want?
- (8:01) Culture Drives Profitability & Other Benefits
- (11:16) The Impact of Employee Recognition
- (11:50) Determining What Your Company Culture Is
- (12:40) Steps to Create A Winning Culture
Defining Your Company Culture and Its Importance to RIAs
You may have heard that defining your company culture is a crucial step in building a successful RIA. It sets the foundation for a positive work environment and establishes the values that guide your organization. Company culture influences employee satisfaction, engagement, and productivity, ultimately impacting the overall success of your RIA. But what is it, really?
Why It’s Important to Your RIA
Culture is particularly important to RIAs as it directly affects the well-being and performance of their employees. Greg Friedman, the co-author of Integrating Cultures in Successful RIA Mergers and Acquisitions, emphasizes that sentiment, saying, “People need to feel good and have an environment that supports their ability to do their best work every day. They feel good when they are respected, appreciated, acknowledged, heard, and can be themselves.”
Think about it… people need to feel good. They need to feel like they’re a part of something. How many times have you been watching your favorite team and noticed that they (or the team they faced) weren’t working together? They begin to fight with each other as frustrations boil over. On the other hand, when a team’s players feel respected and important to the unit, they often find success as a team.
Driving this idea home is a study by AdvisorHub and Edward Jones. The study revealed that wirehouse advisors often felt that their companies didn’t value attributes important to them personally, such as transparent compensation and client-centricity.
What You Can Learn from Your Team
Great Place to Work® Institute conducts an annual survey of more than 1.3 million US employees. They state that, “Employees tell us whether leaders are accessible, communicate honestly and clearly, and if their actions match their words. They tell us whether they feel respected as individuals if they receive training benefits, appreciation, support for their well-being, and opportunities to contribute. They tell us whether they believe their company is fair related to pay, profits, promotions, recognition, favoritism, and opportunities. They tell us if they are proud of their work, their team, and their company and if they feel they make a difference, and their work is meaningful. And they tell us whether they enjoy the people they work with, feel cared for, and can be themselves.”
Now, as a business owner, I wonder if they’re just receiving constructive criticism for not doing a job properly. Think about when you were still in school. You likely had at least one teacher that just drove you nuts. But now that you’ve got the benefit of hindsight, you understand that they were simply pushing you to reach your full potential. However, at the moment, you probably wouldn’t have given them rave reviews.
Regardless, of the context we have to acknowledge that perception is reality. Managing people is hard, and driving a culture that we desire—and more importantly, one that the buyer would desire—is even harder. So let me ask you, what type of company culture do you want? Is it one that a buyer would want? Now, compare that to where you are right now.
Benefits of A Strong Company Culture
While researching this topic, I found an interesting study. Between 1998 and 2022 the business’ that make the Fortune 100 Best Companies to Work For® list outperformed the market by a factor of 3.36. Why? Culture drives profitability. You see, there’s a strength that’s found within this particular list.
When asked if management genuinely seeks and responds to ideas, 82% of employees in these companies responded that this is always or often the case. Looking at your own RIA business, you want to build a culture to drive toward the eight-figure exit. However, you must also understand how culture impacts your firm today.
For example, if you’re operating an RIA that’s innovative and using the latest technology, your clients will see that. Therefore, your culture is impacting your client experience. Likewise, a firm with a strong culture, one where the team has a crystal clear idea of where the firm is going, often has better analytics and insight. Why? Because the team provides the information to make more informed decisions.
A healthy company culture can do all of this, but it can also help you to mitigate risk. If you have a firm that’s renegade or, as one colleague likes to say, “buck wild,” you’re open to greater risk. Compliance will often lock these firms down, making them highly unprofitable. On the other hand, a culture of compliance can lead to greater efficiency in business.
Determining What Your Culture Is
By now, you understand the importance of having a strong company culture. But how do you determine what your current culture is? I’ve come up with a list of traits that often mark businesses with toxic or unproductive cultures. Look at the following traits. Does your firm deal with any of these symptoms of a toxic culture?
- Decreased productivity. Employees in a toxic workplace rarely support their colleagues. This leads to lost revenue.
- Higher turnover. As employees lose satisfaction with their current employment situation, they begin to look for work elsewhere. This leads to increased costs associated with hiring/training.
- Frequent absenteeism. Team members can suffer mental and physical health effects that cause them to take more sick days and miss more than they would in a healthy environment, putting a strain on the rest of the team, and further damaging morale.
- Poor reputation. Online review sites and social media provide a platform for employees to air their grievances. This can make it difficult to acquire great talent.
If you recognize these warning signs in your RIA, it’s not too late. You can take steps right now to change your culture to improve profitability, efficiency, morale, and many other benefits. But how? I’m glad you asked!
How to Improve an RIA’s Company Culture
Creating a strong company culture requires intentional efforts and a focus on fostering trust, respect, employee autonomy, and celebrating successes while learning from mistakes. Here are some specific strategies to improve your RIA’s company culture:
Create a Culture of Trust and Respect
Trust and respect form the foundation of a healthy work environment and contribute to a positive company culture. The Fisher College of Business at The Ohio State University states, “We know that trust leads to greater intimacy, stronger, relationships, and a healthier company culture. Trust and psychological safety enable people to take risks, lean into changes and perform at their best. Trust can build confidence in each other and in the organization.”
To create a culture of trust and respect within your RIA, consider implementing the following strategies:
- Follow through with commitments: Honoring your commitments builds trust among your team and clients, demonstrating that your words can be relied upon.
- Communicate appropriately: Openly share information when necessary while also displaying discretion when required. Transparent communication promotes trust and fosters a collaborative environment. This is a learned art and friends, if anyone is the weakest at this, it’s me. I typically think that others think the way I do. So, when I speak, I don’t consider how it’s going to be taken. But appropriate and effective communication is paramount when building trust.
- Be respectful: Treat your team members with respect, actively listening to their ideas, and resolving conflicts in a healthy and productive manner. Respect is a two-way street, and by demonstrating respect, you encourage a culture of respect within your RIA.
Encourage Employee Autonomy and Empowerment
Similarly, empowering your employees and providing them with autonomy leads to increased job satisfaction, engagement, and productivity. I admit, this is a struggle for me. In my own company, I find it so hard to trust people. But we have to give team members the freedom to make decisions and take ownership of their work. To encourage employee autonomy and empowerment, consider the following approaches:
- Provide opportunities for professional development and growth: The Society for Human Resources Managers (SHRM) reports that managers have more exposure to training opportunities and career progression conversations than non-managers. Therefore, you must look for ways to empower your team to get where they want to be.
- Foster a culture of continuous learning: Encourage employees to pursue new skills, explore innovative ideas, and take calculated risks. This creates an environment where learning and growth are valued, fueling both individual and organizational success.
Finally, recognizing and celebrating achievements is essential for creating a positive and motivated work culture. It not only boosts employee morale but also reinforces desired behaviors and encourages future success. But too many firms neglect their employee recognition programs.
In fact, a study by the American Psychological Association found that most respondents said that their companies did operate some kind of recognition scheme. However, more than a third of the people surveyed have received no recognition in the previous year. Less than half said that recognition was provided fairly, and only half said that they felt valued by their employer.
How to Make Celebration Part of Your Culture
So, how can you create a culture that celebrates successes? Follow these simple steps:
- Implement a recognition and rewards program: Regularly acknowledge and appreciate the efforts and achievements of your team members. This can be done through verbal recognition, employee appreciation events, or tangible rewards.
- Provide fair and consistent recognition: Ensure that recognition is provided fairly and consistently across the organization. Employees should feel valued and appreciated for their contributions.
By adopting these strategies, you can cultivate a strong company culture within your RIA that drives growth, fosters innovation, and ensures the satisfaction and retention of both your clients and employees. But what about you, as the owner? Are you celebrating the small victories?
Friends, driving the profitability in your RIA is important. However, simply cutting expenses isn’t always the most effective way to do so. If you want to create a firm that can offer profitability while also working toward your eight-figure exit, you must implement a winning culture. Changing the culture and growing the value of your RIA is a difficult and lengthy process. It’s one that I don’t recommend doing alone. Working with a coach can help you get where you want to be and avoid the mistakes so many of us make along the way.
Look, I know life is hard. But life is good. Growing an RIA is frustrating when your culture is running in opposition to your goals. By creating a great culture, you can make increasing profitability and drive your firm toward the eight-figure at least financially simple. Hey, let’s go out and make it a great day!
If you would like to learn more about how our team could help you drive your firm toward the eight-figure exit you desire, reach out to us. Our team is always here to help!