Eliza De Pardo on Team Compensation Planning

Show Timeline:
04:00  Human capital components that firms are/should be looking at
05:30  The first step a firm can take to design an effective compensation model
09:13   Using incentive compensation to motivate the right behaviors
15:57    Job descriptions vs. accountabilities
18:35   Incorporating referrals in your incentive plan
22:15   Helping your team understand how they can contribute to increasing referrals
27:14   Non-traditional compensation benefits as a way to provide value for your team
31:27   The importance of understanding how your team members perceive the benefits you offer
34:07   Leveraging compensation strategies to align your core values with your business strategy

Links:
Website:           https://depardoconsulting.com/
LinkedIn:         https://www.linkedin.com/in/eliza-de-pardo-5468a811

Want more?
FA Insight (fainsightsecure.com)
The Evolution of Client Referrals Webinar

Stephen Wershing: http://advisorchecklist.com/blog/
Julie Littlechild: http://www.absoluteengagement.com/blog

Episode Transcript:

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Julie Littlechild:
Welcome to Becoming Referable the podcast that helps you become the kind of advisor people can’t help talking about. I’m Julie Littlechild. And today, Steve and I are talking to Eliza De Pardo, the founder and director of consulting at De Pardo Consulting. Eliza launched De Pardo Consulting after almost a decade as a co-founder and a director of FA Insight. So she brings a very unique blend of evidence and actionable advice. We’re talking to Eliza about team compensation planning, and we know this is a challenging area for advisors or for anyone really. Eliza shares some ideas on how to start thinking about compensation in a more strategic way by focusing on the behaviors we want to encourage as well as the culture that we want to cultivate. This is such an important topic for advisors who want to create a referable business. And with that, let’s get straight to the conversation with Eliza. Eliza, welcome. So happy to have you here today.

Steve Wershing:
Welcome Eliza.

Eliza De Pardo:
Julie, Steven, thanks so much for inviting me along.

Julie Littlechild:
Oh, well, I am excited to talk to you. The main challenge, of course, being, figuring out our time zones to get you on today. But so thank you for being so flexible on that.

Steve Wershing:
Well, we should tell the listeners that Eliza is in Australia, so it’s first thing in the morning for us and evening for her.

Julie Littlechild:
That is true.

Eliza De Pardo:
That’s Western Australia. So probably as far away as possible, I guess.

Steve Wershing:
Lots of people feel that about me. They’d love to be as far away as possible.

Eliza De Pardo:
Only in winter.

Julie Littlechild:
Yes, exactly. But look, I think a lot of our listeners and we’ll connect your name Eliza to a lot of the deep research that you’ve been doing for so many years. Although of course, you’ve been doing so many other things, but maybe we could just start there. Can you tell us a little bit more about the work that you’re doing and have done?

Eliza De Pardo:
Sure. I’d be happy to. So for the last 12 years or so, I’ve been a co-author of the FA Insight research. I co-founded the firm with Daniel Inveen all those years ago. And over the years we’ve explored pretty much every area of advisory firm performance. And every second year we spend a lot of time in human capital and we look very closely at compensation planning. We alternated that with what we call growth by design, which is understanding how firms achieve sustainable growth and looking at marketing and operations, technology, all sorts of things. And also, back of that research, we of course, we’re able to utilize the data to be able to consult directly with advisory firms. And typically, we consult with larger advisory firms and I continue to do that today as De Pardo consulting, but a great deal of the work that I do as a consultant is in strategic growth planning and helping business owners, shareholder groups, to figure out how they’re going to grow, how they’ll differentiate, how they’re going to compete, what they’re going to be known for in the market.

Eliza De Pardo:
But oftentimes that work leads to much needed guidance around human capital. Obviously with people being very much the leading indicator of success for any business. And as a result of that, so much of the work that I consult in is in organizational design and compensation planning. We really find these are areas where firms really get so challenged to work through some of the very intricate challenges that they experience.

Julie Littlechild:
And so, I mean, I said compensation planning, but I guess, more broadly human capital is probably the appropriate term here. And at some level, it seems obvious what we’re talking about, but there’s a lot included under that umbrella. Can you sort of talk us through the components of that that firms are really looking at?

Eliza De Pardo:
Yeah. As it relates to human capital, it really runs the gamut. So oftentimes it’s really hard to make smart decisions in the area of compensation. If you haven’t thought about your organizational design and if you haven’t clearly defined the roles within your firm to then be able to figure out how to compensate. And if you take a step back from there, those decisions are often quite difficult to make without a clear strategy. So if we don’t know where we’re going, it can be very challenging to figure out what is the best structure for our team? What are the roles that make the most sense for us to sit at the types of clients that we want to serve and to try and grow the business, to the extent that we seek to create scale? So all of these pieces are interrelated and beyond organizational design and compensation is of course the big issues around performance management, and of course, business succession transitioning ownership is always a challenge for firms as well.

Eliza De Pardo:
So, the human capital area itself requires sort of attention in so many areas, but there’s kind of a linear approach to it. Even though sometimes for firm owners, it’s kind of hard to take a step back and to think about, well, what do we need to do first before we jump on, for example compensation?

Julie Littlechild:
Right. Yeah. I can see. So I can imagine a lot of people coming to you and thinking they have a compensation issue and you need to start 10 steps back. Is there that first key area that you almost always get back to starting with?

Eliza De Pardo:
Yeah, generally it does depend in some cases on how far advanced the business is, but strategy’s always a great place to start if you’ve got the appetite to do it, if you’ve got the discipline to do it. Organizational design is a very natural next step. And what I mean by that in particular, as it relates to compensation is you really need to be very clear on how you define the roles within your business, what the accountabilities are? Kind of the buckets of accountability, because you can’t do apples to apples comparisons with industry benchmarking data, if you don’t know what the accountabilities are that you’re comparing to. So I always encourage firms to do that groundwork around creating role clarity. And that means documented job descriptions, understanding where some team members might be fulfilling dual roles, and you might need to combine position descriptions and then combine the compensation data in order to come up with what is a fair and reasonable way of compensating a team member.

Eliza De Pardo:
So they’re great places to start. But then in addition to that, I would say, as it relates to compensation, the very first step that I encourage firms to take, once they’re down that path is to think through their compensation philosophy. And that means bringing together the executive team. If you’ve got more than one business owner, you need to be collectively coming together to think through what are our beliefs around compensation? What are some of the principles that we’re going to apply to the compensation plan that we can apply consistently? So every time we add new talent, we’re not trying to figure this stuff out all over again, if that makes sense.