From compensation to culture: How to boost engagement at your firm

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As you look out over the next 10 years, what do you see for yourself, your team and your clients? What are the key elements that will inspire engagement in your team and motivate them to do their best work?

To help financial advisors find those answers for themselves, I co-created a survey with Julie Littlechild from Absolute Engagement with the aim of determining specific elements that motivate and engage teams.

We then used the results to develop a framework for tracking engagement, how to think about team engagement and how positive team engagement can benefit your firm. We called it the Engagement Pyramid, inspired by psychologist Abraham Maslow’s hierarchy of needs, which is often depicted as hierarchical levels within a pyramid.

Our Engagement Pyramid has three levels. Its base comprises basic employment standards of compensation and benefits; the middle layer deals with employee development; and the peak level addresses culture.

Consistent compensation
Let’s be honest: While culture is a crucial element, it will be hard for employees to become engaged at a higher level if their financial needs are not being met by your current compensation and benefits plan. If your employees are spending their commutes worried about fulfilling their current and future financial obligations, it will get in the way of them being happy and focused.

That’s why it is important to ensure you are following a disciplined and consistent approach to setting and administering your compensation plan.

Ask yourself these questions when assessing your current plan:

  1. Does your compensation structure encourage your team to reach the goals and vision you’ve set?
  2. Do you have a way to acknowledge team members who’ve gone above and beyond?
  3. Do you have a way to acknowledge team members who are bringing culture, vision or values to life?

Your compensation plan should define a base salary range (i.e., fair compensation for an employee’s roles and responsibilities) for each position based on the value of the position to the firm and the market value of the position.

It’s important to revisit the salary range on an ongoing basis and adjust as needed with market changes. You should increase an employee upward within the range as their performance results warrant and as job responsibilities and skills increase.

When it comes to establishing a base salary and making decisions on salary increases, I recommend the following ground rules:

  • Set compensation at 20% to 25% of the range when the employee is new to the role.
  • Fifty percent, or median, represents the pay range for a more seasoned and experienced employee who is meeting or exceeding performance expectations.
  • The high-end of the range — 75% to 80% and above — is for the most experienced employees — ones who are seen as experts and are performing at very high levels. Within this range, increased pay opportunities should only come in the form of incentive pay unless market conditions and competition for talent forces increasing bases above the 80% range.
  • In referencing years of experience, remember such experience is relative to the employee’s current role and should not include prior unrelated professional experience.
  • In addition to compensation, don’t underestimate the value of a complete benefits plan. According to our survey, which was administered last fall to 350 RIAs and BDs: 60% managers and 40% employees, the most-valued benefits are:

Feedback is priceless
In my experience, a powerful motivator for employees is the opportunity to learn and grow in responsibilities and contributions to the firm.

The key to developing an employee development plan is an annual goal-setting process that produces metrics not only aligned with the employee’s role, but which also includes the development of skills and knowledge applicable to other positions within the firm. Such goal-setting not only creates the opportunity for an employee to grow in their current job but, over time, develops a continuum for career development and achievement.

The good news is that our research suggests firms are doing a good job of developing goals, with over three-quarters of those surveyed reporting that they are engaging in goal-setting with their managers.

Less ideal, however, was our finding that only half are receiving formal performance reviews and, more importantly, only 23% are receiving informal feedback.

The importance of consistent and informal feedback cannot be overstated. It builds rapport and coaches employees in a way that creates engagement and momentum to excel. Feedback also creates opportunities for employees to be recognized for improvement and achievement.

The frequency of the feedback is important as well. Several firms I have worked with have implemented not only weekly, monthly and quarterly feedback meetings, but also semi-annual meetings with one of the firm partners. This ensures that employees are staying connected to senior management and are in regular dialogue around how their role and contributions fit in with broader firm goals. This practice also creates coaching and mentoring opportunities for partners.

As a firm leader, it is your job to ensure that you are providing your employees with feedback. This means facilitating a two-way dialogue using job descriptions, formalized goal-setting and review processes, which includes weekly, monthly, and quarterly check-in meetings.

I encourage managers to be open to the use of technology to help with gathering employee feedback. The most recent digital employee engagement resources include a new breed of pulse tools, feedback apps and anonymous social networking tools. These advanced performance evaluation methods provide regular check-ins with employees and allow them to understand where they are being challenged. One day, these tools may eventually replace the dreaded annual performance review (although I have not seen this practice trending as yet in the advisory industry.)

Highest ground
The day you have more than one team member you have a culture — values, beliefs, underlying assumptions, attitudes and behaviors shared by a group of people. “Culture, leadership, and the work” sit atop our Engagement Pyramid because employees want to feel like they belong to something bigger than themselves. So the question to all of you reading this is: do you reward and recognize the employees who embrace the firm culture?

According to survey respondents, the three top definitions of a defined firm culture are:

  1. One that is experienced by all team members.
  2. One that has a purpose and vision of the firm that makes employees feel their job is important.
  3. One which gives employees a sense that the firm cares about its people.

Communication and leadership are critical components of the highest level of the Engagement Pyramid — values that thrive in an environment where employees are encouraged to speak freely and share opinions with management. This builds trust and loyalty and makes employees know that their work really matters. Top drivers include feeling a strong sense of purpose as a result of the work, understanding the firm’s strategic direction and goals and understanding how one’s role contributes to the company accomplishing goals.

Summing up, to engage your team in 2020 and beyond, focus on financially rewarding your team members through a clear and transparent compensation plan; developing your employees through goal-setting and providing more employee feedback; and creating a culture of accountability, appreciation and autonomy — all while emphasizing work-life balance and a compassionate leadership style.

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