Human Capital Strategies
A successful compensation plan ensures that you pay for what you get while you get what you pay for. Industry research heavily supports the benefits of investing your interests in Human Capital that will directly affect your bottom line. Based upon Ironstone’s work with multiple advisory firms to establish hiring, staffing, and compensation systems/plans, we have established the following key components to consider while building your compensation plan:
A Compensation Model Is Determined By The Following:
- Firm goals (Rev, AUM, Households, Client Retention, etc.)
- Available firm resources (Business and Human Capital costs – i.e. budget)
- Competitive environment (demographic factors – NYC vs. Small town USA and hiring competition)
- Solo, Silo, Ensemble Firm
A Compensation Plan Structure Is Based Upon:
- Well-defined roles/responsibilities of each position (Job Descriptions for Producer and Non-Producer)
- Salary ranges for each role
- Clear incentive opportunities (% of Net Rev, % of salary to pay out for performance)
- Established benefits – paid time off, medical, 401k, career development
- Outlined performance goals for each position
- Regular performance reviews (quarterly recommended) to determine if individual goals are being met and what type of incentive to pay
Compensation Structure Types Include:
- Non-producers are paid salary only, while Producers are paid salary plus incentives
- Non-producers and Producers are paid salary plus incentives to drive performance
- Non-Experienced employees are paid higher salary with career path incentives – i.e. acquiring licenses 7/63/65, CFP, – moving towards a higher % of Rev pay with experience and in turn, salary becomes lower
- Attraction of non-experienced is the ability for a firm to “mold” and align the individual to the practice
- Experienced employees are paid lower salary with higher % Rev incentives because of experience
Common Mistakes Are:
- Lack of structure around compensation – IDEAL GOAL – disciplined, transparent, and explainable structure – avoid subjectivity
- Paying out bonuses regardless of whether firm has reached goals
- Lack of conducting consistent performance reviews or aligning performance with pay
- Using line of credit to pay bonuses
- Incentives only being monetary – money does not motivate everyone – time off, personal development, wellness programs, awards, working virtually, etc…
While the benefits of an outstanding compensation plan might be clear-cut, the components and drivers can be somewhat of a mystery. A clearly defined and well communicated STRUCTURE is the key to your successful compensation model! Disciplined compensation plans are crucial for top-performance.
Develop strategies for effectiveness without paying too much and maintaining competitive compensation. Ironstone can help you attain this and help you gain insight into how to make sure that performance meets firm standards, which align with firm goals and ultimately results in success.
Follow us as we explore each of Ironstone’s Fundamental 4™!
- Strategic Planning
- Business Development
- Operational Effectiveness
- The Human Element
You won’t want to miss our next in the series: Business Development-Marketing Plans!
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