Most proprietors of any business will tell you that they fully understand their business, including where they are the most efficient and inefficient. As discussed in previous blogs, the need for an adviser firm to be able to cost their key business processes becomes increasingly important pre and post Retail Distribution Review. However the reality for most firms is that they do not understand their key business processes or indeed are able to cost them accurately.
Running a business where the key activities are sales and customer service, can leave little time for consistent process reviews. Just because the high level sales numbers seem right doesn’t mean that the amount of profit that is being derived from these sales is what it could be.
So the first thing to look at is the processes of the company, how does it actually operate?
Basic questions need to be asked, such as; are the agreed processes being adopted by all the teams, from advisers to support staff? Where are the processes being ignored and by whom? Is duplication taking place? And are all staff doing tasks that they should be, are highly qualified staff doing tasks they should be delegating?
The Retail Distribution Review is driving the need for higher qualified advisers and subsequently a high level of investment in them by the firms they work for. Every proprietor should be looking to maximise the return on this investment and the potential of these individuals, including ensuring that they are spending the right amount of time on the important parts of an increasingly segmented database of clients.
With any process the best place to start is to take the time to understand fully what actually happens now. Explore what the staff do, and how do they do it. Think about mapping out a few of the key processes and asking the staff impacted to record what actually happens for a period of time. If the firm has more than one adviser, a good place to start is tracking the interface between them and the support staff. Get all the staff together and ask the different areas of the firm to describe how they think the process works. Inevitably different processes will fall out so from this, so ask them how they think they can improve them.
You’ll be surprised at how quickly efficiencies are suggested. Watch out for the slow adopters and the individuals who refuse to change. They will not only reduce profitability but will also deprive other members of staff of their chance at being more efficient. Pick out the other key processes and ensure that you review them regularly. You should be aiming at overall key process reviews at least twice a year.
The understanding delivered by such process examination will start to deliver an ability to gauge how much the key activities within a business actually cost. This is a key point for the adviser firm in the pre and post Retail Distribution Review world, where fees will become the standard way of dealing with many clients.
However the benefits of this approach can also go well beyond what you may expect. New starters to the business can be more easily adopted because of the clearly documented way of working. Staff feel more empowered and become more interested in running the business well. Other benefits include being able to grow more effectively via new advisers, or indeed mergers/acquisitions. Ultimately the value of a business depends on the profit it makes and the adoption of a process culture will mean it will have a significant influence on value at the time of sale.
This sort of attention to detail will help create a culture of self help in the business and staff will feel empowered and very much part of the overall business process.
In the next blog I’ll look at one process and work through it.