This case study is based on the situation of a client of the Covenant Group. Names and details have been changed to preserve privacy.



‘‘Jeremy,” I said, “you look like you’ve just lost a good friend. What happened?”

“In a way,” he replied, “that’s how I feel.”

This was the start of a conversation with Jeremy Stone, an up-and-coming advisor who, after four years in the business, was graduating from survival mode to success in his practice.

His production had increased steadily and handsomely from his first year in the business. He had a solid, well-written business plan, an effective marketing strategy and, as part of an exercise we had completed together a year earlier, had designed an organizational structure and support team to carry him through the next few years of growth.

If anything, Jeremy was ahead of himself, in that he now had three full-time staff members when he probably could have gotten by with two. Jeremy’s plan, however, called for even more rapid growth than he had experienced so far, and he was adamant that he wanted to be “ahead of the curve” when it came to having qualified people on board.

“I thought you had hit pretty much all your targets over the past year, Jeremy,” I said. “Wasn’t that exciting enough for you?”

“It sure was,” he replied. “I am elated with what we have accomplished. But I have to say that I don’t think others on the team are anywhere near as thrilled as I am. Last week, I called a meeting to announce our end-of-year results and, as a surprise, I handed each of my three support people a cheque for $3,500 on the spot.

“I thought they’d jump up and down because I’d always told them they would share in our success. But it didn’t have the impact I thought it would. They were polite enough to thank me, but two of them just stared at me while the other acted as if the bonus was expected so he couldn’t understand all the fuss.”

“What kind of expectations did you set beforehand?” I asked.

“Well, there wasn’t a formula. I am always telling them, however, that if the business does well, they would do well. Based on our results, I was willing to allocate approximately $10,000 of our profits to the team. I thought that was quite generous. Each staff member is important to our operation and I really try to promote the notion of being part of an integrated team. That’s how I came up with the amount of $3,500 each.”

“Let me guess, Jeremy,” I said. “The two people who ‘just sort of stared at you’ were your most senior and junior staff members, and it was the one in the middle who acted like he expected a bonus of $3,500. Am I right?”

“Yes, you are,” he answered with some surprise. “Was that a guess or a practised observation?”

“A little of both,” I said. “In our experience, one of the questions that puzzles advisors a lot is: ‘How do I pay my staff to get the results I want?’ Many advisors mistakenly believe that the same things that motivate them motivate their support people.

“While a strong leader can communicate a vision that is exciting and create loyal followers, it is important to recognize that people go along for the ride for varying reasons. Let’s take each of your team members in turn and do a quick assessment. This won’t be very scientific but should give us some perspective. Start with your lowest-level employee — what’s his or her job?”

“That is Courtney, our receptionist and file clerk,” Jeremy replied. “She handles the mail, gets coffee for clients and does all those other small but essential tasks that come with running an office. This is her first job out of school, and she impressed us right away with her bubbly personality and desire to please. She has been with us about a year.”

“And how did you decide how to compensate Courtney?” I asked.

“We offered her $24,000 a year, which represented what we thought was a fair starting salary for someone new to the business,” he said. “We promised her a review after three months, which, unfortunately, we never got around to doing because we were so busy. After six months, I apologized to her for the delay and gave her a 10% raise to compensate. She seemed pretty happy with that.”

@page_break@“Did you speak with Courtney about why she was getting an increase?” I asked.

“I told her we were pleased with her work and I thanked her for her contribution to the team,” he said.

“And then, about six months later,” I said, “you gave her another $3,500, or almost 15% of her original salary. I am not suggesting she didn’t deserve it, but my suspicion is that Courtney’s reaction to the bonus was more the result of confusion than lack of gratitude. I am sure she was very pleased with the money, but I wonder if she could make the connection between her job and the results.

“As a general rule,” I continued, “people should be rewarded for results only if there is a direct connection between what they do and the accomplishments. While we can certainly acknowledge the contribution individuals make to the overall effort, people who are assigned tasks such as those you described for Courtney should be rewarded for executing those tasks when they exceed your expectations for performance relative to those tasks — not simply because the business does well. By way of comparison, let’s consider your most senior staff person.”

“That would be Leigh,” Jeremy said. “She is my saviour. Not only does she keep me on track by booking all my appointments, she handles all the marketing events we do and talks to clients when I am not available. Some of our best clients will call her before they call me — that’s how much they like her.”

“And how is Leigh paid?” I asked.

“She probably isn’t paid enough for what she does,” he said. “She has been with me from my first year in business, and I have increased her salary every year. Today, she is at $60,000.”

“And you gave her the same $3,500 bonus as Courtney,” I said, “except that, in Leigh’s case, it amounted to just slightly more than 5% of her base salary. Second, it appears that Leigh’s work can have a direct impact on revenue. Third, even you don’t feel Leigh is paid proportionate to her contribution. See any problems there?”

“Yeah,” Jeremy admitted. “Her stare was probably more in disappointment or even anger than admiration.”

“That’s possible,” I agreed. “My guess is that you lucked out with the person in the middle.”

“That would be Ben,” Jeremy said. “He is my paraplanner and presentation prep guy — a very good technician but not strong with clients. He probably feels that he got just what he deserved.”

“From his reaction,” I said, “that is a possibility.”

“OK,” Jeremy said, “I missed that opportunity, which is regrettable, and I will think about how I can make it up to Leigh. On a longer term basis, however, what can I do to make our compensation system more relevant to the results I expect from everyone?”

“You should start with a compensation philosophy,” I said. “Do you want to position yourself as having a low, middle-of-the-road or an above-average compensation opportunity for employees? Do you want to have a minimum base salary and maximum incentive program, or do you want to be known for paying high base salaries with limited bonuses? Will your plan include non-cash compensation? What kind of performance do you want to encourage?

“With those kinds of questions answered,” I continued, “you need to be more formal in setting expectations. On the money side, that means looking at salary surveys for similar positions in your community to establish upper and lower limits for each job level. To apply those criteria effectively, you must have clear role descriptions, along with meaningful performance appraisal and feedback mechanisms, to ensure people are evaluated fairly against measures that everyone agrees are appropriate.

“The Internet is a great source of information,” I continued, “and outlining the details of your program can be done in a day.”

“Great,” Jeremy said. “Let’s find that day in our schedules.” IE



George Hartman is a coach and
facilitator with the Covenant Group in Toronto. He can be reached at george@covenantgroup.com.