#FASuccess Ep 418: Developing The “Middle” Management Layer To Scale Up Team Leadership Capacity For $3B Of AUM, With Stacey McKinnon

Resources Featured In This Episode:

• Stacey McKinnon: Website | LinkedIn
• #FASuccess Ep 190: Scaling An Advisory Firm By Finding New Talent Outside The Financial Services Industry, with Stacey McKinnon
• Entrepreneurial Operating System
• 7 Lessons Learned Launching A Sustainable Business Model To Serve (And Attract!) Profitable Millennials And Gen Z Clients
• Achieving Career Growth With An Ownership Mindset And Finding Where To Create The Most Positive Impact
• WorkBoard
• Admired Leadership
• Brave New Work: Are You Ready to Reinvent Your Organization? by Aaron Dignan
• A Completely Different Game: My Leadership Playbook by Emma Hayes
• G2 Leadership Institute

Looking for sample client service calendars, marketing plans, and more? Check out our FAS resource page!

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Full Transcript:

Michael: Welcome, Stacey McKinnon, to the "Financial Advisor Success" Podcast.

Stacey: Thank you. I'm excited to be here.

Michael: I'm excited to have you with us today, or I should really say back with us today, because you have joined us in the past about 4 years ago as you were sort of on this ongoing path of growing what, at the time, was already a multi-billion-dollar RIA. And now, it's been a few more years of growing and scaling up. And one of the things I find that's really fascinating as advisory firms start to get into what's nominally called the multi-billion phase. You call it north of $10 million of revenue is there's this whole other layer of infrastructure that has to get built. It usually starts a little under $10 million of revenue. But if you haven't done it, you really start feeling the pain by then where there's just so many people in the firm, because you might have a 30 or 40 headcount or more, that the structure that a lot of us start with, which is there is 1 or a couple of founding partners, and they kind of divide and conquer and everyone's got 1 portion of the company that they're responsible for and reports up to them, just doesn't work. There's too many people to oversee and manage and be responsible for. And you have to start creating this layer of what is effectively middle management. And at least in my world, when I hear middle management, I still think of Bill Lumbergh from "Office Space" asking for TPS reports. It's not the prettiest picture of middle management and a lot of modern tropes about corporate America. But there really is a point as a business scales, where that's what defines the success of the firm. That's what defines whether the strategy from the top actually turns into execution across the whole company. And we, as advisors, have basically zero experience and knowledge in our space about how to hire middle management, how to train them, how to develop them if you want to bring them up internally. And so it tends to be really, really messy, I find, for a lot of advisory firms when they get to this phase and have to figure out how to have this management layer that sits between the founders or the most senior partners or the executive leadership and the rest of the people in the company that do all the things that actually get the work done.

And I know you have lived a lot of this journey over the past couple of years, so, I'm excited to get into this rising phenomenon of middle management in advisory firms, the most positive version of middle management. Because again, I feel like there's a lot of negative connotations around it. And to me, this is becoming one of the positive defining characteristics of who hits the next level of growth.

Stacey: You hit on a lot of really important points. I was talking to somebody in the industry recently and I was sharing that I think most firms have an expertise in leading clients, but not necessarily leading people. And we are such good people-people, because that's how we built our business. A lot of advisors tend to be more outgoing and communicative and really know how to work with clients. But working with people inside your firm is such a different experience than working with clients. And so, I'm excited to get into this topic because I think a lot of teams struggle with how do I grow and evolve the company, both take care of my clients, but then have an empowering culture that's growing with me? And you need leaders to be able to do that. And it's really harder than it seems.

The Difference Between Leading Clients And Leading Firm Staff [07:04]

Michael: So can you just talk a little bit more about that theme right there, that idea...I like how you framed most firms have an expertise in leading clients and not in leading people. And of course, my brain just literally responds, "Well, clients are people too," but I understand the distinction and the point. Yes, leading clients in a client relationship is different than leading people in a company-organization management relationship. And I think that is kind of the point that you're making. But I'd love to hear more of what's the difference? Why is it so different that being a good people-person that leads clients doesn't translate well when you are leading your team as well?

Stacey: Well, I think that there's some functional aspects of this that really make an impact. So functionally, we talk to our clients, some of them once a year, twice a year, 4 times a year, maybe some of our really good relationships, we talk to once a month. But our clients come in and out of our lives and we tend to be in a position of authority and expertise when we're working with that person. They're coming to us because they need something. They have a problem we need to solve. And as advisors, we are playing the role of like, let's solve that problem together. When you're doing people leadership, I think one of the stark differences is you actually spend every day together. So just like your brother or sister growing up, tussles are going to happen, right? There's a, I didn't say "hi" to you in the hallway issue or, I don't agree with your political position and you talk about it at work. I don't agree with this or that. And I think that what happens is sometimes in leading clients, we really are in a place where we are the expertise and some of the nuances of relationships don't necessarily get involved.

When you're leading people, the nuances of relationships are always involved. I think most people want to go and work in an organization where they are seen and valued, somebody cares about them, that somebody believes in them, that they're being developed to a place where they can either achieve personal success. As part of the team or as part of the company, they want to be a part of a company that's growing and successful. And in order to do that, you have to have really, really deep and meaningful relationships. And it's not quite as authoritative, in my opinion, as it is in a client dynamic. So just I'll pause there. Functionally, I think we're talking about 2 different relationship styles.

Michael: I really like that framing, both the idea. Clients I see a couple of times a year, depending on whatever my meeting cadence is, and I'm kind of by definition, the authority in the room. Yes, they control their decisions and make their own choices in the end, but they're kind of coming to me in a position of authority and expertise. I'm supposed to have and give the answers and then they decide what to do with it. And I like your analogy that, yeah, when you contrast that with the team where you're with them every day and growing up with a sibling, there's going to be some tussles along the way that. Yeah, that's a completely different dynamic because now, I just start thinking of that in the consciousness of a parent as well. Okay. When the kids are tussling, just coming in saying, "Well, here's what you should do" and ordering them around, generally doesn't work well and is less effective the older they get. And so, by the time you're working with team members who are fully-formed adults, yeah, that whole style of how I show up for clients suddenly is remarkably different from how I have to show up for team members.

Stacey: It's completely different. And I love how you brought the analogy with your children in because I feel like that's what ends up happening is as a leader of clients, we are the authority figure. And so when a team member comes to us and says, "Okay. Great. How can I build my career? I want to be an advisor one day. What do I do?" Too often, the default is to the authority figure. So, it's do everything that I did and then you'll be an advisor one day, which, people are different. Humans are different. There's different learning styles. There's different adaptations. The advisor that a founder is, might not be the advisor that their junior associate is that wants to grow into that role one day. And so to be a people leader, you almost have to step out of yourself. You almost have to, for a second, not be the authority figure. Look at the human sitting across the table from you, understand what they're good at, what struggles they face, where some of their roadblocks are, what they need to be successful and you almost need to put yourself in their shoes for a second before you give the advice. And we do that with clients too. We take into consideration clients' needs and desires and wishes. But I think with team members, it's even more important to recognize who people are as the starting point to giving advice. And I think that's probably the number 1 mistake that I see newer leaders or leaders who don't have experience make is that they just use their own experience and just say be like me and you'll be great. I just don't know that humanity works that way.

Michael: It would be easier if it did.

Stacey: It would be.

Michael: I'd like to say that for the record.

What Morton Wealth Looks Like Today [12:06]

Michael: So now, I want to understand more about how this is really manifested and played out in the firm. But I think as a starting point, just get us oriented to the advisory firm overall, Morton Wealth, and who you are and what you do just so we have the context of the organization as a whole.

Stacey: When I was on the podcast last 4 years ago, I think we had 30 people. Now we have 60. So we've doubled in size of our team. So that's been a journey that we'll share more today on. We manage just under $3 billion and have around 1,300 clients. As a company, we've been really thoughtful to our mission, our vision, our core values. I think I've shared that in past podcasts before, but one of the things that I think is really important to us is our mission, which is to empower better investors. And we say that we do that in 4 ways. So empower better investors in our clients, helping our clients to be more educated so they can make better decisions for themselves and their families. We empower better investors in our team where we help them invest into their career, grow. That includes education sessions and ways that we really kind of highlight their personal growth. We invest or we empower better investors in our community, meaning we help community organizations and charitable organizations grow and develop and try the best that we can to give back. And then we empower better investors in our company, meaning we're really thoughtful to the way that our company invests, scales and grows so that we can create a better client experience. But then also, acknowledging that growth is incredibly important to be able to support the firm of the future.

We're a 41-year-old firm, which means that we have an older client base and that means we have a bigger withdrawal rate, which means we have even more of a need to grow and to evolve. And so, we're constantly investing into the company and thinking about how can we grow more. And then as a beneficiary, our team members can then have more career opportunities too. And so that's kind of the ethos of the organization. I would say a niche that we have is that we've always done pretty much alternative investments since the 1990s. That's how we've been investing. I liken ourselves to a farm-to-table restaurant versus a traditional steakhouse. If you went to a steakhouse, they have meat and potatoes. You can expect something similar on the menu. You go to a farm-to-table restaurant, they go out to the farmers market. They source what's in season and that's how they design the menu. We tend to be really nimble in that way. A lot of our clients probably have a 40% to 50% alternative investment allocation. And so that's added actually a lot of complexities in how we develop, train people, how many people we have on the team, because it takes a lot more team members to do that well. So, that's kind of the quick facts of who Morton is and maybe the background.

Michael: If I can ask, what's revenue overall for the organization as a whole?

Stacey: Yeah. Well, I guess I'm going to go ahead and say forward-looking revenue, we're around $20 million.

Michael: Okay. So, you're right in that realm of just over $300,000 of revenue per employee, right where firms tend to be.

Stacey: We're a little heavier employee count than most other firms. Whenever we look at the benchmarking for this, we tend to be a little heavier. But I think it has to happen because of the alternative investments.

Michael: Well, I guess firms tend to grow that number as they scale, so a lot of under-$10 million firms. I see a lot that are more $200 to $250 [thousand]. Multi-billion firms sometimes get closer to $350,000 and you're at $300,000 to $325,000.

Stacey: Exactly. Yeah.

How Morton Wealth Structures Its Leadership Team [15:37]

Michael: So then, with kind of the theme du jour around people and people management, can you talk a little bit about the organizational structure of 60 people? What does your org chart look like? How are the seats in the departments structured?

Stacey: Yeah, that's a good question. And maybe I should even clarify, as a COO, I think that my definition of my role is a little different than what most people would define as the COO. So, we take a little bit more of the EOS system where we have a visionary and an integrator. So we have Jeff Sarti, who's our CEO and then myself, who's more of our integrator. As a COO, I don't hold some of the traditional departments that maybe other firms would hold. So, things like human capital, I have a director of human capital. Finance, there's a director of finance. CCO, who handles compliance. Our director of human capital handles office management and anything that has to do with the facilities in the office.

For my role as a COO, I'm much more heavily...and I'm also the chief marketing officer, much more heavily involved in growth, advisory, and client service. So, the director of advisors reports to me. Our director of marketing reports to me. I work with my director of advice on the financial planning manager and how they execute our financial planning department and then somebody who oversees our client services and that's the associates that are in the room with advisors and then also our centralized operations team who interfaces with Schwab and Fidelity, who are our custodians. And so as a COO, I'm less involved in the business management side, which I think is traditional for a lot of COOs, and I'm more involved in the...I'm going to call it the executing-the-thing-we-do side, which is the advice side. I have my CFP and I work with about 40 clients myself. And so, it's been nice for me to be able to actually kind of feel the boots on the ground, understand what's happening in the client relationships and those dynamics and then kind of think through service offering structure and how we're going to execute that as a COO.

Michael: So, I was trying to kind of take some notes as you went of the different areas, the different directors that report up to you. So I heard finance, so financial business reporting, human capital, compliance, the advisors, marketing. I think you said a director of advice. So, I guess I'm wondering what's the difference between director of advice and director of advisors?

Stacey: Yeah, same thing, director. We call him the director of growth and advice. But just to clarify, the director of finance and the compliance officer are actually reporting to the CEO, to Jeff. So, he's overseeing more of the business functions, I would say, of the company and I'm overseeing more of the advice functions. Our chief investment officer also reports to Jeff. They work very, very closely and our CEO and chief investment officer spend probably maybe 30% to 40% of his time is spent on the investments as well. But this all kind of relates back to our investment philosophy, right? This is our bread and butter, our niche as a firm.

Maybe even to back up for a moment. Our leadership team is structured, I think very differently than most firms where we used to have a traditional leadership team where you had your C-suite and your directors and everybody would get together once a week and they would all talk about things. And we did that for a long time. But then what I realized is that it doesn't always work because oftentimes, you don't have the people in the room that you actually need in the room, meaning I liken it to a contractor and a designer. It's almost as if you had a contractor build the house and then the contractor got to opine on all the design work or the designer got to opine on all the ways the contractor was building the house. If my chief investment officer and I are in a room together and I'm wearing my chief marketing officer hat and I'm telling her how to build the portfolios, she's like, "Come on, this is my job." And then if she's telling me how to design the website, I'm like, "Come on, this is my job." And there was this conflict happening. This is a few years ago in the leadership team where we were just finding that the people who really could provide each other with collaborative advice and support, they weren't in the room. And so we broke up the leadership team, I would say almost 2 years ago into a growth team and a resiliency team. So we actually have 2 leadership teams. On the growth team, myself and our CEO sit on it, but then in addition, we have our director of marketing, our director of advice. We have somebody who oversees our business owner segment of our company. We have a special service offering for business owners. And then we have the person who oversees our custodial referral program. And then we have our head of financial planning. So that team, the growth team, we are constantly just focused on how can we grow our organization through clients or grow our organization through services and quality of advice. So that's kind of the growth team.

Then the resiliency team, myself and our CEO sit on that team as well. But then that has our director of human capital, director of finance, chief compliance officer, the person who oversees alternative investment administration, our CIO, and our head of client services. And so, that team is focused on building a resilient infrastructure. What do we need to do to make sure that our budget is in order that we're achieving profitability metrics? How can we become more efficient as a firm? What people will we need to hire in the future? And what does our recruiting and kind of bench process look like? So these 2 teams operate segmented from each other. Once a quarter, we all come together, we share our initiatives. We kind of pick and choose like, "Oh, well, this one affects me. So, hey, let's have a follow-up meeting on that." And they interact together and they're aware of it. But on a weekly-monthly basis, the growth teams focus on growth and the resiliency teams focus on resiliency. It's been about a year-and-a-half of this structure and it has been game-changing for us. We're so much more focused. Our leadership meetings are much more effective. We have the right people at the table. We have the people at the table that can provide advice and expertise when somebody has a roadblock that needs to be solved. We're better communicators. And honestly, for a firm that's growing like our firm, that adds up to 13 or 14 people. And now, we have almost 25% of our organization is just in-the-know. They know what's going on. It's transparent. They understand the mission. They understand what we're trying to achieve. They're able to go out to their departments and achieve that mission. There's no secrets at the top. We try to be as transparent as possible. And so, I would say of all the things that we've done over the last few years, that's probably provided significant opportunity, both from a people-leadership standpoint. I think our team members are better led because of this, but then also we've achieved our best year of growth this year. And it's really been since about a year ago now that our growth rate has just skyrocketed for us as a firm. And a lot of it, I think, is because we made this leadership team split.

Michael: Because I guess otherwise, if all these people are nominally part of the leadership team, it's just literally too many people to have in the room.

Stacey: It's too many people.

Michael: If I'm counting marketing advice, business owners, referrals, head of planning, human capital, finance, compliance, alts admin, investment officer, client service, there's 11 people in various types of director roles and you and Jeff. So, a 13-person leadership team is a really crowded room to just get stuff done.

Stacey: Too much.

Michael: So I guess, size got to the point of saying, can we split this into functional areas and capabilities that align to what people are focused on, which is growth does the growthy stuff and resiliency does the infrastructure and make sure the business runs well as a business part.

Stacey: Correct. Yeah, so it's been beautiful from that standpoint. It's no longer talking in circles, lack of decision-making, too many cooks in the kitchen. It's now we're focused on this one thing. How do we get there? And I'm really, really happy with our leadership team. I think everyone adds so much value that we could not do it without the people that are at the table. And I really have a lot of gratitude for them and their ability to make us better.

Michael: And so in this vein, it sounds like the 2 teams are also reflective of your and Jeff's functional areas that you have most of the growth direct reports on the growth and there's a growth team. Jeff has the resiliency direct reports as on the resiliency team, but you're both in both as CEO and COO because you got to know what's happening across the business.

Stacey: Exactly. Yeah. There's some exceptions to that rule. But for the most part, Jeff, as a CEO, cares very, very much about growth and how we're achieving growth and he's setting the vision and the mission of the organization. But having us all in the room to talk about it, involving our other team members, not having it be a top-down, Jeff and I tell everyone what to do and they go do it, but everyone kind of collaborating and being like, okay, what's best for the organization? We got to get on this. It just it creates more of a culture of ownership across the board and not everybody on these 2 teams are owners. We have a different partner group where we have 13 partners as well. Some of them cross over but not all of them. And so, I think that as we were building the organization and we can talk about all the things we did wrong on the way to here... But one of the things that we really acknowledged is that Jeff and I, and Meghan, our CIO, the 3 of us used to be the leadership team and we would make all the decisions and everything would rest on our shoulders. And all that happened was that we were burnt out. We were overworked. We were tired. We were trying to do too many things, but we also had too much control and that control actually didn't empower a growing organization. It didn't say we're all in it together. We can all accomplish this thing together. It said us 3 will make all the decisions and trust us to guide you in the right way.

I think maybe when you have a smaller firm, you do that and that's a truth and I think that's probably the right way to do it. But as you scale your organization, you just can't do it. And it's kind of like the old theory of even as a parent, if you don't take care of yourself, it's really hard to take care of your kids. And so, I think that there's that aspect of it too where I think we were on a journey to burnout, but then bringing all these really, really talented people in who have just made us better left and right, it's been, I think, empowering for us as well to just see that this is an organization that's dependent upon the 3 of us. It's actually an organization where if any one of the 3 of us wasn't there, it would still thrive and succeed. And I think for us, that's what success looks like.

The Role Of Partnership At Morton Wealth [26:24]

Michael: And if I heard correctly, you are a firm that has multiple owners and partners, but being a partner doesn't necessarily mean you're on one of these teams and being on one of these teams doesn't necessarily mean you're a partner. Did I hear that right, those are kind of distinct for you?

Stacey: Yes, that is true. Being on one of these teams means you're probably on the path to partnership though. I think that, in general, we have about 25% of our employee count are partners. So that's kind of a little bit of a target for us. We want to continue having more partners in the group, but we also want partnership to mean something. We want it to be something that's earned. It has to be a reflection of your contribution to growing and making the company better. But our partner group is actually a little different than others as well where we have a lot of non-advisors in our partner group. We have a lot of people who are making a positive impact in the organization, but it's not because they control revenue. It's because they're able to help scale us whether that's from a growth standpoint or resiliency standpoint. It's really important. And so, while not everybody today that's in the growth and resiliency team is a partner, everybody in that team is certainly partnership eligible in the future. Does that make sense?

Michael: Yeah, yeah, yeah. So, I'm struck by this. There's a mentality I hear for a lot of folks, a lot of advisors as well as non-advisor team members, that it's a story something in the effect of, "I really wish I could be a partner because I want a seat at the table for where the decisions are getting made." So, it's fascinating to hear a firm like yours saying "No. Those are basically separate," aside from almost coming the other way, "If you're really effective at your seat at the table, you may earn the opportunity for partnership." Not partnership because you want a seat at the table, but executing well with the seat can get you to partnership.

Stacey: 100%, yeah. Just because you're at the table, that's not a reflection of value-add. This is a very interesting topic and something I've talked about in the past. I saw this Instagram reel that was on parenting and chores and it was super-fascinating. This person was basically saying that as a society, we do chores wrong. We pay people to do a job. We say, "Here's your job. Do it and we'll pay you for it." What if, instead in parenting we said, "Here's all the ways that you can add value to our household? There's a lot of different things you can do to add value to the household. What ways would you like to add value? Have your child select the way to add value, once they've added value, you can pay them for it." Super-interesting twist on it. But one of my advisors, I had shared this reel with him and he went and tested it with his kids. So, he told his 6-year-old daughter the ways that she could add value. And one of the ways that she could add value was that his 4-year-old son was really scared of going to school every day and they went to the same school. And so, one of the ways she could add value was that she could hold her brother's hand to help him go to school. And so, she chose that one and she went to school. And he took this incredible photo that almost made me want to cry, of his daughter holding his son's hand going to school because that's how she was going to add value.

How this translates into work is sometimes we make the mistake of just being like, "Here's your job. I'll pay you for the job," versus asking people in the organization, how do you want to add value to this company? What are the things that you think can make us better? How do you want to participate as part of the team and what are you going to be accountable to in participating? Are you capable of what you're saying you want to do? And then we make sure that they're taken care of and well compensated for adding that value. And I think it's a slight tweak to mindset, but I think that it's a healthy tweak and it's something that we should all just take a step back and ask ourselves, "Am I really asking my team how they want to add value?" And look, there's partners at the partner table where they want to add value by taking really good care of clients and the revenue reflects that. And so they're at the partner table, and if I have a question around service offerings or how to better give advice, I'm probably going to bring them into that and I'm going to ask for their comments and their feedback and their advice on that, and that's something that I think, those people are really, really good at. That, to me, is separate than running the business. And I think we should really be reflective of the people we have at the table and ask ourselves are they driving value in the way that we need for the decision that we're trying to make?

How Morton Wealth Expanded Its Leadership Team [30:46]

Michael: So Stacey, I guess let me ask if you can take me back for one second. So as you did this leadership team expansion, it was you and Jeff and Meghan and you decided you needed more people on the team and let go of some of the decision-making process, what was that initial leadership team, who was on it originally?

Stacey: Yeah. So I would say probably that Meghan-Jeff-Stacey version happened until probably right before the pandemic and we made all of the decisions as an organization. Like I mentioned earlier, it was just too much pressure for all of us. And so, we came together and we expanded to add more people to the leadership team. We said this is great. We'll add more people. We'll expand the responsibilities, a little bit less pressure on our shoulders. And I think this is going to be really empowering for others. And so we did that.

Michael: So who did you add, what seats, what roles, did that turn into a 13-person team right away? Was it like we went from 3 to 5?

Stacey: Yeah, it was operations, client service, and advisory. So, just somebody to help make sure that just regular business operations got done well, someone to help with service offerings, somebody to help with overseeing the advisory team, then very shortly after we added compliance and finance. And so you kind of had maybe a typical...what most firms have is their C-suite or their directors levels and everybody was in a room together. We were meeting once a week or every other week and all of us were involved in every decision.

Michael: Okay. And you'd said as you did this, some of these people were managers that got moved into more of a director role and then you had to hire some middle managers, I guess basically to backfill what they were. So for organizations that haven't grown to this level, I feel like a lot of these words of executives and leadership and directors and managers are used semi-interchangeably. But to me, you're definitely not using them interchangeably, they mean they mean different things. So I guess, can you speak more to what does director level versus manager mean in context here?

Stacey: Yeah. So in this situation, one of the things that we acknowledged was that we had to have more people in decision-making seats, but in order to move them into decision-making seats, we needed more people to manage the day-to-day. So when I think about the people in the leadership team at that time, my expectation was that they spent 25% to 50% of their time in more strategic initiatives. So, it could be something like we're launching a new service offering for next-gen and that person is spending a lot of their time doing market research, understanding pricing, testing, coordinating with the marketing team for materials we might need for that. That might be more strategic work versus managing the day-to-day is a client has a request. Who's going to take that request and how are we going to get that back to the client and execute what they've asked us for? And so, we needed to have more people in manager roles managing the day-to-day so that the people at the leadership team could spend at least 25% to 50% of their time helping us move forward in the growth initiatives and the strategic initiatives that we had at that time. And we had 30 people 4 years ago. Now we have 60 people. And so, we also acknowledge that we were going to have to grow quite significantly. And so, we wanted to put these things into place and this was pre-pandemic. But as all things go, best laid plans. We put it into place, but we made, I think, one pretty stark mistake which is that we didn't train people how to lead well. And I think this is something that was a big learning lesson for us throughout the pandemic.

And even till today, we're still learning this lesson of if you're going to remove yourself from the day-to-day, meaning if the founder or leader of the organization is not going to be involved in day-to-day decision-making, people management, people oversight, you have to ask yourself the question of what makes a good people leader and how will those people working under your new manager or leader, feel loved, valued and seen when you're not in the room?

Michael: The conventional view, the traditional view is...and I'm going to presume this was a version in your firm, you pick who is going to be director of operations, director of client service, director of advisory, because they are the most senior, most experienced people, often the ones that others look up to, often the ones that are already doing some or much or all of the training of new people. The most senior client service person helps teach the newer client service people that come on board. So, I guess I'm just trying to visualize...correct me if I'm wrong. I'm assuming that was kind of the path to leadership for a lot of the people that showed up on this leadership team. So, where was the gap? Why is the fact that my most senior operations person is now on the operations leadership team, not enough for them to lead operations?

Stacey: I think that potentially the question is where do you want their time and attention focused? And so, one of the things that we had done was we had brought people up that were really good at doing their job. But it's different mindset when you're no longer responsible for doing your job well, and now you're responsible for the company's success and other people doing their job well. There's a whole light switch that has to turn on, off, on, off, and then find a place in the middle where you're still focused on what value are you personally bringing to the organization. But oftentimes, you're helping people to discover the value that they're bringing to the organization, developing them to exist in their own greatness. In many instances, you want them to be better than you ever were.

But when you promote people into leadership positions, they have to have a heart for developing people in that way. They can't just only exist in a space of how do I become great? And I think that's really hard as you're growing in your own management and people leadership capabilities. Oftentimes, your entire career up to that point, has been built on your own efforts. Think about the CFP and becoming an advisor and learning and growing, and learning and growing, and you achieve this kind of pinnacle. And then all of a sudden it's not about how you learn and grow, it's about how you help others to learn and grow and adjusting your every day to adopt to that need and that new, I think, demand, it's an interesting change. And unless you prepare people for it, unless you train them for it, if you don't develop them for it, it cannot work out quite as well. And I'd be happy to even share kind of what our journey looked like how we acknowledge these issues and then maybe how we've been kind of implementing some ways to fix it too.

How Stacey Balances Being A Leader With Her Other Work Responsibilities [37:38]

Michael: Yeah. I'm very interested to hear more about how this played on how you addressed it. I kind of get it at the fundamental level when someone's really good at doing a thing, they often become a very senior doer. And one of the fundamental challenges of leadership, particularly as organizations get fairly large, is there's so much leadership to do, that tongue-in-cheek, kind of seriously, you don't do anything around here anymore. All the other people that do things, do things. If you help 8 doers be much better at doing, you have way more impact than what you personally could have ever done on your own. But if your whole career and life was rewarded for how good you do the thing, it's really hard to not do it anymore.

Stacey: Exactly. Yeah. And there's almost an identity crisis that happens in that moment where your ethos was built on your own work and now, your ethos is going to be on empowering other people's work. And there's little shifts that had to happen. And even for me, there was little shifts that had to happen is when I became a leader, I started acknowledging how important it was that I have an hour of alone work every day and starting in 2021 and until today from 6 a.m. to 7 a.m., every day I work. And that is my hour of work and that's my ability to make sure my team is set up for success, to review strategic projects. Sometimes I write white papers. I've written white papers for Kitces before and I usually write those at 6:00 a.m. to 7:00 a.m. in the morning because I acknowledge that the minute I get to the office, my job is to be with others. My job is to help my team. My job is to be there for strategic decisions and meetings, to be there for my clients. So, if my role and responsibility and how I exist the minute I get into the office is in service to my company and leaders and people, that means I have to change the way that I work to get my work done. And so, I've even embraced just in how I work every single day, it had to change because of what my responsibilities are and how they change. And I think that sometimes things that we miss, as leaders, is just those little tiny tweaks to how we exist. It has to be different going forward.

Michael: So first of all, I just have to ask are you a morning person?

Stacey: Yes.

Michael: This isn't like, "Everyone, you need to wake up hours earlier to actually be able to grow your business?"

Stacey: No. You just need to choose your hour, right. You've got to choose your hour. A lot of my leaders, actually their hour is 9:00 p.m. to 10:00 p.m. They just really kind of make sure that they have time for their family. They maybe put the kids to bed. And then they say, "Okay, great. I'm going to get into the zone now." There's lots of night owls. There's some people that can do it during normal working hours. I think sometimes that's hard if you're in a location with a lot of other people. There's something about the hour a day that I believe needs to be really protected space, meaning you've got to give to yourself a little. You have to say this is the moment where I'm going to make sure that the things that are really important are accomplished and have the mental space and capacity to give to others. I generally get to the office by 9:30 every day. I assume that as soon as I get to the office by 9:30, anything that I really want to accomplish for the day, won't be accomplished again until 6:00 a.m. tomorrow when I do my hour to myself. I almost operate under that assumption in general. Before I leave to go to the office, I try to have 0 emails in my inbox so that I'm just starting my day fresh and any emails that had existed, either are assigned to a time when I'm going to do that that day or assigned to another day. I have a really amazing work management software called WorkBoard that I use that keeps me on track in terms of what I need to accomplish on a daily basis. And so, these little tricks I've implemented into the way that I operate put some boundaries in place because it allows me to be a more present leader if I'm not always just concerned with all the work I need to get done. And instead, I'm just admitting that my job is to give to the organization the minute I step in those doors.

Setting OKRs And Leveraging Software To Help Teams And Individuals Achieve Top Goals [41:43]

Michael: Right. So what is WorkBoard?

Stacey: WorkBoard is an OKR [Objectives and Key Results] management software. So most people, when they are doing strategic planning at least in this industry... I've heard 2 versions, 1 is Traction and EOS and the other is OKRs. OKRs are objectives and key results similar to the Traction Rocks model, if anybody's heard of that. But basically, you get together as a team, you set an objective. You say what are the key results that tell me that I've achieved this objective and then you go on towards achieving it. WorkBoard is a software that manages OKRs. And so at Morton, we not only have OKRs assigned at the department levels, but we also have personal OKRs for all of our team members. This is part of our career pathing process. Every 6 months managers meet with a team member and they reset their OKRs. Most people get between 4 to 6 OKRs over a 6-month period. And the way that I like to think about it is the manager and the team member sit down and if you were to close your eyes and say in 6 months, what do I want to be true about my knowledge, my skillset, my ability to team well, my individual contributions? And whatever you want to be true 6 months from now, those are the objectives. And then you ask yourself the question, "What's it going to take for me to get there?"

So, just to get a little bit more in the weeds, somebody might say that they want to be able to tell a story about each one of our investments. I shared earlier that our alternative investments are a big complication in our company, but it also means we have to be really focused on people development. So over a 6-month period for the major 10 investments, they want to be able to be really good storytellers. So then what do they need to do every month to get to the place where they're really good storytellers? In WorkBoard, these goals are inserted into the system. They update the system with their goals. They update it with their activities. Their manager gets alerts. We're able to work with them throughout the course of the 6 months so it doesn't end up being these goals you set and then you do it 2 weeks before they're due.

Michael: Right.

Stacey: And then in addition, WorkBoard has a task management system kind of similar to Trello or some of the other tools where anytime I need to do anything, I put all of my tasks into WorkBoard. Any emails I get, I can forward the email to WorkBoard and it automatically turns it into a task for me as well. And so every day when I wake up and I'm doing my power-hour, I go to WorkBoard first and I see all the things that I had assigned to that day and I just start working through them. I clean out my inbox. I assign it to the correct day. But it's a really, really nice system where the view is a week view so you can very easily see all your tasks. These are the things you need to accomplish. But then it's also a system for me, as a leader, where I get to make sure that team members are making progress on either their department or their individual OKRs. And so, I think this is a really good business management tool.

Downside of WorkBoard is it's not integrated with your CRM. So for client management things, I have to either use our CRM or if it's something that doesn't have to be documented, I'll put it in the WorkBoard system as a reminder to myself to follow up with a client about XYZ thing. But that's probably the downside of it and why I think people would be hesitant to use it is that the integration is not there. But if you're mostly spending your time running the business... If you surveyed my entire team about WorkBoard, they would say that WorkBoard makes their job easier, certainly.

Michael: So when you do these OKRs with the team...I think you said you've got company OKRs and then team members personally get their 4 to 6 OKRs around things like I want to be able to tell a better story about our investments?

Stacey: Yeah.

Michael: So I guess I'm just trying to visualize on what the capacity, workload...do I get company OKRs or my own? Do I get company OKRs and my own? It feels like that can potentially add up to a lot of things that I get tasked on from different directions, but maybe I'm over extrapolating that.

Stacey: Yeah. I think it depends on where you are in your life cycle. So the way that we tend to think about OKRs is if a department has an OKR, we try to simplify it. It might have 1. So as an example, my client services team might have an OKR around creating a better onboarding experience. And so the team's getting together, they're testing things out, they're building email templates and systems and workflows that would create a better onboarding experience. And they're working as a team to accomplish this one goal. Over the next 6 months, we want to have a better onboarding experience. That could be like a team OKR as an example.

I think that's a little different than personal OKRs, especially as you're building a company where people want personal development and personal growth. You have to build OKRs that I think are both reflective of their current job, but also the future that they want. So, an OKR for somebody in their current position could be "Hey, do 3 SOPs [Standard Operating Procedures] on common tasks for a client service responsibility." We have a new system we call Morton Wealth University, but it's essentially in e-learning modules. And so, if over the course of 6 months they build 3 teachings of…how to prepare for a client meeting could be one of the teachings. Theoretically, that's going to take them 2 or 3 hours. If they have to do 3 of them, that's 9 hours over a 6-month period. It's really not like the world's biggest lift if you actually add up the amount of time, but it's applicable to their job and it helps the team. And that might be something that we ask a person to do on their individual OKRs. But then the storytelling example I gave earlier, that could be something where maybe they want to become an advisor one day and these are the skills that they need to build. It might not be relevant today because they sit in a meeting where the advisor normally talks about these investments. But if they want to grow in their career, these are some things that they have to get better at, they have to accomplish. And so when we set OKRs in general, we try to do about half and half. Maybe 3 are related to their current role and either getting better or more skilled or helping the team in their current position. And generally, 3 are going to be about their future role and helping them to make progress towards that.

Michael: And you've found 6-month cycles are good as opposed to quarterly or year-long?

Stacey: As a leader or a manager, I might have milestones in the goals where we don't just accomplish things immediately. We kind of layer on the learning and development process. I think 3 months is a little too fast for that. I feel like you kind of need to do it over a 6-month period, but I also think a year is way too long and what ends up happening is that those things get lost and other things get prioritized.

I think the worst situation that has happened to me before is when somebody really wants to grow in their career and they are asking for the tools to grow and develop. And then if you just say it's going to take time, that's not a really good answer and people don't really feel invested. The reason that the OKRs are important, even if they might seem like a lot, it's the path to clarity, right? In people management and leadership, the conflict comes when a leader has 1 expectation and a person has another expectation and then those 2 things don't match. By defining OKRs and very clearly saying these are the things that you have to do to get to where you want to go, you eliminate some of that rub. Now, it happens still. Don't get me wrong. There's still times where we have that conflict, but at least as a leader, you're doing your best by giving clarity to your people.

Encountering Bumps In The Road Growing The Team And Management Cadre [49:07]

Michael: So now, take me back as you said, you went through this adjustment from I'm doing more client work to apparently, I'm supposed to help other people do their things. I don't do the things myself now or as much and that that was a challenge for the other folks as they were getting into leadership as well. So now, help us understand what happened next. How did you fix this? How did you start to train? What did you do to address it as you realized this was happening?

Stacey: Well, maybe what I can share is the signaling that happened that got us to where we knew this was a problem. So we put this leadership team together in 2019. Then the pandemic happened and all of a sudden we had this situation where people were working from home and we no longer had the benefit of saying "hi" to them in the hallway. We're a 1-office location. So the relationships that we had while we were all rallying together to take care of clients in 2020 and 2021, especially, we started to see something occur, which is that relationships started to fade and managers were managing activities and initiatives, but people weren't necessarily being seen, valued and heard. And what we accidentally did, I think as leaders, Meg and Jeff and myself, is we created this, we'll call it ivory tower effect where we were all kind of in a fiefdom making decisions and we had these managers in place who were implementing decisions, but the decisions weren't necessarily always understood by the managers. Maybe we didn't do a good enough job of explaining. We're all just kind of rushing, trying to manage things in a pandemic. At the same time, a few other things were happening in our organization. We had to remodel our offices so that we could prepare for the people when we eventually came back because we hired a significant number of people during the pandemic. And so, we're kind of like a little bit, chickens with our head cut off trying to manage everything. We're delegating a lot to our managers, but they weren't trained or necessarily given power and responsibility in the right way to do it. And we just started to see our culture crumble. We started to see drama pop up. We started to see, I like the term, 'me versus we' mentality where people were just working on their own in their homes. They became a little bit more me-focused. Gossip was starting to happen behind closed doors. We had the silliest issue ever occur, which I regret deeply. But we were making decisions on the office remodel and our designers would send Jeff and I things to approve all the time. And one time, they sent us these trash cans and Jeff and I just haphazardly approved them. The trash cans came. They were way too small. Everybody started complaining about the trash cans. Somebody looked up the price of the trash cans, then started spreading a rumor that we're willing to pay more for our trash cans than we are for tools and things people need. It was just the worst.

Michael: Trash cans. Stocking an office is always ludicrously expensive when you have to order the furniture from the office catalogs. Yep.

Stacey: I know. But I lovingly call this thing that happened, "Trash Can Gate" because our culture imploded because of the trash cans. Top 5 leadership mistakes I've ever made were these trash cans. But what that did to me was it signaled, right? If you have a really good positive culture where people feel valued, seen, heard, invested into, nobody's looking up the price of the trash can. If you have a culture where there's problems and maybe problems you don't see whether it's because of hybrid work or it was because you're disconnected from the people because you layered on management, this to me, is a signal. This meant something was wrong.

And in February 2022, I went to Jeff, my CEO, and I just said "This isn't fun anymore. We're not having fun. This is really hard. There's something wrong with the culture. We have to do something to fix it." And unfortunately, we kind of knew what that looked like and it was really, really hard and intimidating to make that solve. We had hired so many people during the pandemic, that they just didn't have relationships with us. They didn't know us. They didn't trust us. They were just depending on us being like, "Oh, we'll do the right thing. You trust us," but they didn't know that.

Michael: What I find it's one of those effects that happens when you expand the leadership team and start to delegate as the founder-owner is almost, by definition, the organization...up until that point, everyone who did things reported to you, so you know what's happening in the organization. At least one of the founder-owner senior leadership folks knows what's happening in in every part of the organization because everyone who does a thing, reports to one of them. And once you get to a leadership team structure, the doers report to the leadership team and the leadership team reports to the executives, founders, whatever you call them in that role, and suddenly you truly are 1 step disconnected and removed from the people that do the things in the organization. And so at best, they're not as invested into the relationship because they literally don't report to you anymore. At worst, you literally don't actually have visibility into what's happening in their world that's creating problems. So you come up with strategies and ideas to do things that just really don't actually work at the ground level of what's getting done because it really does change when you get one step removed.

Stacey: It does. And you kind of are still looked at though, as a person where people are like, "Hey, this is wrong. Solve the problem." You're like, "Okay, I'm going to solve the problem" and do all these things. And then you solve the problem and they're like, "Why are you dictating to me?" I'm like, "I don't know." I just solved the problem and then I accidentally over-controlled it and there's this situation that occurs that I think was really hard and we saw that happening. And so, we made this kind of...we called it our engagement plan and we said, "Okay. How are we going to reset this culture? How are we going to get people more engaged?" And because we have one office that's in an area that there's not a lot of traffic, one of the things that we decided to do, and this was a little earlier than others, is we decided to have an office policy. And so, our office policy still today, is Monday through Thursday from 9:30 to 3:30, we want people to be able to do kids drop-offs, coach sports after school. But Monday through Thursday, 6 hours a day, we want those to be core hours. Everybody is there and then they can kind of work remotely and make up the other hours as they wish and people can work remotely Fridays. And then periodically, if you want to go somewhere and work remotely for a week, that's okay. But on a regular basis, people work Monday through Thursday 9:30 to 3:30. And so we put this together. When we were preparing to announce it, we said we think we're going to lose some people along the way. That certainly is a possibility. We were really nervous about it. But at the end of the day, we need a cultural reset. We need people to know us. We need an engagement plan. We need to figure out what's really wrong here. And so in June 2022, we made this announcement that we were going to return to the office and then we had 20% turnover in 2 months.

Michael: Sorry. Didn't mean to snort-laugh, but ouch. So how big was the team at this point?

Stacey: We had 50 people. So we lost 10 people in a 2-month period.

Michael: So 10 people just up and quit and said I like the remote thing. I'm just not coming back.

Stacey: Yeah. And you know what? I think it's easy to blame it on the remote thing, but I think it's a little bit more realistic to probably blame it on us, as leaders, and we had lessons that we had to learn in this situation. We had to rethink the way that we were managing and learning and growing a firm. And when you have, I like to lovingly call the period of time between 20 employees and 40 employees, the teenage years. It's when nobody looks good and everybody is awkward and nobody really understands what's going on. And you go from mom and pop to institutional and you have all the breaks that you just mentioned that happen in the culture. And about 8 of the 10 people that left, they had also started during the pandemic. So in fairness to us, these were people who we just didn't have trust and relationships with but it really, really opened our eyes to the importance of relationships as leaders. In order to have a successful firm now and into the future, we had to care deeply about the relationships that we have and the relationships we have with our managers. And honestly, it kind of made us get it together.

Implementing Formal Leadership Training To Break The Mold Of 3 Management 'Avatars' [57:04]

Stacey: The first thing we did is we started doing leadership training and manager training because as the 20% turnover unfolded, that's when all the stories happened. That's when all the people told me these are the bad things that happen. This is what my manager said. These are the issues that occurred and we had to hear all those stories to be like, "Oh, we've never trained people on how to be good leaders and managers," and maybe I'll even just give you a few examples. So I think some of these are a little bit hidden where you don't always notice it. One manager type that I think is dangerous that people don't always acknowledge is what I'll call the 'nice manager.' With the nice manager, people feel loved. They feel cared for. They feel like they get a really warm hug. There's a happiness associated with it. Usually this person is the first to make dinner for everyone if they had an injury or they needed it. The challenge with the nice manager is that the nice manager is afraid of feedback. They're a feedback avoider generally. And so they don't give people feedback on how they can get better. They are so interested in being liked, that they really struggle with what they perceive as hurting people's feelings if they give them feedback. And so, what ends up happening is that nobody is accountable, feedback isn't received. There's a feel-good but then people aren't growing in their careers and they're frustrated by that. And we had a few people share with us the fact that we didn't have enough of a feedback culture with our management team meant that they felt ignored. And so that was a problem that we were faced with. That's one avatar, I would say, of a manager.

We also had the technical manager. The manager who practices what they preach, so they have respect. People know them as the best but they're missing empathy. They think to themselves, "Just do the work and you'll be great. I don't understand what's so hard about this," versus looking at the person and seeing what their roadblocks are. They tend to diagnose symptoms, not causes, so they don't dig deep enough to really figure out the problem. Because for them, the problem is easily solved by their own capabilities, but they don't necessarily want to or know how to solve it for other people. And I think growth stagnates in that situation because that leader is just always the best. But they don't actually know how to train and develop people to be as good as they are.

And then I would say there's probably the third one that was, I think a little bit more secretive which, sorry to use this language but I'm going to call it the narcissistic leader. And that's the leader that develops people to help themself look better, meaning they'll play both sides of the coin. If they're talking to their person and their person disagrees with a leadership decision, they'll say to them, "Oh, I'll protect you. I'll make you feel better. I got your back. I'll protect you from leadership." And then when they're talking to leadership, they'll say things like, "That person doesn't understand. They're terrible. They should be fired. Why do we even have them on the team?" And that leader, I think, is one of the most dangerous leaders because they're playing both sides of the coin. They're playing both kind of show-good to leadership side because that's their value system. But then they're also indirectly creating a lot of issues within the organization because their commentary on "I'll protect you from leadership" just makes that divide even further. And so, we kind of started to recognize these 3 different manager types, all, I think, good intentioned but not trained execution, that really caused a lot of issues for us and our organization and we knew we had to fix that.

Michael: And so what did fixing it look like? Well, it sounds like the direction of leadership and management training but what is that? What did you do?

Stacey: Yeah, so there's a few things that we did. The first step that we took was we had all of the team members who were leaders and management take a program called the Admired Leadership Program. The Admired Leadership Program is an online module system that goes through the different behaviors of leaders. And the best way I can describe the difference between managing a firm and a behavior of leader is an example they give in the videos actually where they talk about a CEO who started in a firm. They were going to be an amazing CEO. They had awesome strategy, started the process of implementing it. But every day when they came to the office, they never held the door open for the person behind them. So just day in, day out, they let the door shut on whoever was behind them. And what happened over a 6-month period of time is slowly, but surely, nobody respected the CEO anymore. And a lot of it was because they let the door shut on all of their people and they just weren't paying attention. And so the behavior of leadership in that situation was someone who had great strategic ideas, but kind of just didn't care about people or care about their impact on people. So, the Admired Leadership Program goes through modules like how to keep people accountable, how to give feedback, how to make time to lead. And so as a leadership team... And it's only like $1,000/person to have this program. So it's a very cheap opportunity to dig in and invest into your managers. So what we ended up doing is we created pods of 2 to 3 managers each and we started taking 1 or 2 modules together and then we would talk about it and we would learn and we would grow. And that really, really helped one-on-one management, meaning it really helped managers learn how to give feedback, how to speak to their team, the behaviors of admired leaders and what it means to be an admired leader. And that, I think, was step 1 in our process and that certainly supported this change. Step 2 in our process was actually reading a book called Brave New Work. I don't know if you've heard of it before.

Creating A Culture Of "Continuous Participatory Change" [1:02:38]

Stacey: But in Brave New Work, they basically talk about how American businesses accidentally have created poor cultures. And they rewind back to the early 1900s when we were building factories and everybody had to make the same size line shoe. And so, people started getting rewarded on executing the process or the SOP or the strategy perfectly. But what ended up happening is you ended up with factories of a lot of people who knew how to follow rules, but didn't think outside the box. They didn't innovate. They didn't have a sense of autonomy. They were just there to execute work. And I don't want to be a part of a business where I just go and execute work. I want to use my brain. I want to make an impact. I want to feel like I'm valued as an individual. And so, one of the things that happens as you scale organizations, is sometimes you layer on so much processes, procedure, and rules, that you end up what they call in the book, "permission-based employees," meaning a bunch of team members that will only do things if they're given permission to do things. And as a leadership team, you might not intend that. You might not want to be permission-based, but the more structure you layer on, the more you signal that.

Michael: At some point, just if you grow the organization large enough, it gets really tiring to have to give everyone permission for everything.

Stacey: It does. And they give an analogy I think that's a pretty good one in the book. It's like having a stoplight system versus a roundabout system. At a stoplight, you tell people when to stop, slow down and go. There's also 32 places that you can get in car accidents at stoplights. In a roundabout, you teach people how to use a roundabout and then you let them use a roundabout and there's 8 places to get in car accidents in a roundabout. And in America, we don't really love roundabouts. But I think the analogy still holds true that you have to ask yourself the question, "As I grow this organization, as I layer on managers and departments, how do I create a roundabout system and not a stoplight system? How do I create a system where people are encouraged and empowered to bring their ideas to make the company better?" And in the book, there's a whole chapter on a concept called Continuous Participatory Change. It's when change doesn't happen to people, but they're rather a part of the change process and they're constantly changing to make the company better. So actually, you never feel change. Even though change happens all the time, you no longer feel it because the people most impacted by whatever the change is, they're the ones that are helping make the decisions on it.

And so about 2 years ago, we read this book together as a leadership team. This was kind of after we'd taken all the Admired Leadership modules and we said, "How do we become a company that believes in Continuous Participatory Change? How do we become a company where people are not at the whim of change? It doesn't happen to them, but they're a part of it." And so that's where the growth and resiliency team came from. That's when we started changing each of our departments where, if a financial planning process needs to change, the financial planning team weighs in on it before that change happens. It doesn't just happen from leadership down. And to give a very simple example, we had a process where every plan was approved by a manager before it went out to a client. And I was asking the team members on the planning team a question, it's from the book, which is "What's stopping you from doing the best work of your life?" I went around and I asked, "What's stopping you from doing the best work of your life?" And they said, "What's stopping me is plan approvals." I'm like, "What? What do you mean plan approvals are stopping you? I thought that would make your work better. Why is it stopping you?" And they're like, "I'm just so nervous. I get so in my head about them that I just freeze and it makes me spend double the amount of time on every plan because I'm so worried it won't get approved." So I just asked them the question of like, "Okay. If we don't do plan approvals, if I cancel all plan approvals right now, what happens?" And they're like, "No, no, no, don't do that. I need the plan approval so it's right. I want the plan approval." I'm like, "Okay. So what other solutions do we have?" And they came up with the solution that they wanted collaborative approvals. They wanted the planning team to work together more and they wanted the group discussion to happen so that they collectively, were supporting each other in improving plans.

And so we made that change and we implemented it and they're happier. And I think it's working. And in fact, it's working better because now it's not just the manager approving, but they're all learning and growing with one another and it's making it a much better system. And so, I think that the Brave New Work principles were really, really helpful in helping us recover from this period of time. So, not only having leaders who are trained to be managers and leaders who understand the behavioral aspects of people management, but then in addition, changing the way that we operate as a culture so that more people are involved in any decisions that impact them. I think those 2 things really turned it around for us. And even today, we're continuing to refine what I think the reversal of those 3 manager avatars are that I shared earlier, which is what does it mean to be an empowering manager? And that's something that I've spent a lot of time on recently.

Michael: So, were there any other things that you implemented and did as you went through this transition? Step 1 was the Admired Leadership program. Step 2 was Brave New Work and doing the work as a team and asking some of the questions from the book. Were there other things as well, or that became the core of what's driven the change since then?

Stacey: That's the core of what's driven the change. But I'll share where I am today, which is one of the things that I think that we've done. As a culture, we are a very kind and loving culture, meaning we tend to have a lot of fun at work. We laugh a lot. We enjoy the company of our colleagues and peers. We enjoy the work that we do. Sometimes what that ends up happening, though, is that every once in a while can be a little bit soft or lackadaisical or maybe not have as much of a culture of accountability. And so one thing I've been doing more recently is digging into a concept I actually learned from the new head coach of the U.S. Women's Soccer Team, which is how do you create a culture or a team that believe so heavily in the mission and the vision of the organization or the thing that you're trying to do that they can't help but be self-accountable or mutually accountable as a team to actually achieve the things that they want to achieve? And I'm not sure if you know the story of the U.S. Women's Soccer coach, Emma Hayes, who just became the coach in June. And the U.S. Women's Soccer Team was really struggling over the last few years with its popularity, with its playing. It had a really bad showing in the World Cup in 2023. And so they changed coaches. And Emma Hayes is a coach from Chelsea in the UK. And she was given 10 weeks before the U.S. Olympics to coach this team. And in 10 weeks, she brought a team that was broken, to the gold medal. And I've been watching this being, "How did this happen? What occurred in this situation? How do you take a team in 10 weeks and turn them from a team that's really struggling to a team that wins Olympic gold?"

And essentially, she's been able to accomplish what I would probably say is like the most empowering leader of them all. She basically is saying, I as a leader, my job is to love my players. My job is to care about my players. But even in lots of instances, more importantly, my job is to care about the team. I have to have the players that make this team better. And if my players know that I care about them, that I want what's in their best interest, any feedback I give them, they're going to know it comes from a place of love. They're going to know it comes from a place of support. When I say I want them to suffer, they know that I don't mean that in terms of being mean. They know that I mean that in terms of I want them to grow, to develop, to put the hard work in so that they can believe in themselves and accomplish everything they've ever wanted to accomplish for themselves and for the team. I want them to believe in the team and encourage one another to suffer through the hard times to get the thing that they want so that we can all collectively win together.

And there's this beautiful message wrapped into, I think, what she has created in the U.S. Women's Soccer Team that I think can be applied to business. And I've been applying it at Morton over the last few months is how do you love people so deeply as a people leader that you can't help but keep them accountable to the things that you, as an organization, want to accomplish and what they want to accomplish in their career? And I probably think that it's not there yet. It's not perfect yet, but I probably think that's the secret sauce to being an excellent manager, this balance of care deeply, but also hold them to the excellent expectations that they even have of themselves.

Michael: And what's the name of the book, do you know?

Stacey: Her name is Emma Hayes. Yeah, maybe we can put it in the show notes after. I'll find the name of it [Editor's Note: A Completely Different Game: My Leadership Playbook. It's a really, really fascinating book. And anyone who loves soccer or even has girls or young women, it's a very, very empowering book.

Michael: So for folks who are listening, this is episode 418. So if you go to kitces.com/418 for the episode, we'll have a link out to Emma's book.

What Surprised Stacey The Most During Morton's Recent Growth Stage [1:11:39]

Michael: So Stacey, as you reflect now on this journey over the past 4 or 5 years and the stage of growth doubling from a 30- to 60-[person] team and navigating the pandemic along the way, what surprised you the most about building and growing through this stage of the business?

Stacey: So, one of the things that I've worked through myself is that I feel like when I can do one-on-ones with people as a leader, if I am leading you on something you want to accomplish, I think I can do that well. Where I've really struggled to grow is when I lead leaders. So if you come to me and you say, "Hey, I have this challenge with my team, how do I work through it?" And then I help you work through it and then you go and do the thing, but I'm not in the room to do the thing, it's really much more challenging to lead leaders in that way. And that's one of the things that I think was really surprising. I understood the principles of one-on-one leadership. I didn't understand the principles of one-to-one to one-to-many leadership. And so that's been something I've been developing and growing in it. And honestly, it's probably what sparked my interest in learning from outside of our industry. I think that a good example is the U.S. Women's Soccer Team, these are people who are leading in different ways. Emma Hayes, the coach, she's got 5 coaches that manage the team on a day-to-day basis. She is one step removed from them, but she still cares about them deeply. And so, I think that probably the answer to this is that you care about all the people in your organization as individuals, as humans. You acknowledge them as individuals and the contributions they make, but then you really create good training and development to let your managers lead. Let them be the expert in all the areas they are and take a step back from that. And I think in growing in my career, I wanted to be and I was the expert in a lot of areas. And I think what I've learned the most is that to create a resilient organization now and into the future, to create one where we can go from 60 to 120, I have to let go and but then dig in to really deeply caring about our people.

Changing The Firm's Meeting Structure To Provide More Touchpoints [1:13:50]

Michael: So what was the low point for you on this journey?

Stacey: Oh, definitely in 2022 when I told Jeff I wasn't having fun anymore. But look, without that low point, I wouldn't have been able to learn any of the things that I just shared. It was really hard. It was really, really tough. There were so many questions around how are we going to run this organization? It was at the time where everybody was consolidating too, and you have those questions around should we just consolidate with one of the big firms? Are we the right leaders and people in place? And so we asked all those questions. But I think the thing I'm most proud of in that moment is that Jeff and I didn't just keep doing things the way that we were doing them. We knew the consequences to our action. We kind of had a feeling a lot of people would quit. But we had to make the hard choices in order to fix the company, develop the company, save the company, however you want to put it. And that was really, really tough. There were so many days where I was upset and frustrated and really hard on myself too and trying to look in the mirror through this process and ask how I could do things better. And that was tough. I am so grateful we went through it today.

If I rewind back on that time, even though I laugh about "Trash Can Gate" and a few other things, we wouldn't be the company we are today, I think, without going through that. And so I would even just encourage when times are hard, when it's tough, sometimes you got to make the tough decisions knowing it'll be tougher for a period of time. But if you can get yourself to the other end of it, it's just so good.

Michael: Were there any differences in how you managed this transition when 20% of the team up and quits and I guess you just got to do this mass rehiring process?

Stacey: Yes. One good thing I think that came out of it actually is...so it happened in June and what we ended up doing is we canceled all client meetings for 3 months. And that feels drastic, right?

Michael: Wow.

Stacey: The thing that we do is take care of our clients. But instead, what we did is we had advisors call every client, check in with them, see how they were doing, ask about their vacation plans, and just basically say, "Love it, have such a great time. How about we plan a meeting in September, October?" So every advisor...because we only had 1 advisor leave. So really, the advisor situation wasn't dire in that way. So the advisors called all their clients, they checked in with them, they heard about their summer vacations, and we were able to punt all of our meetings to the fall. And that gave us enough time to rehire and reset. But then in addition to that, it also made us ask the question of "Do clients like meetings?" So, we started just digging into that question too. We've had our clients on this regimented meeting schedule, depending on the client, 2 times a year, 4 times a year, 1 time a year. And is that really what they value? Or do they value smaller, more frequent touch points? And so, we've really flipped our service model on our head over the last 2 years, where our goal is to have more touch points with clients, but maybe sometimes smaller. And for a lot of our clients, we kind of don't even have meetings anymore. We'll send them a video portfolio review, or we'll call them to talk about the things that are happening that are important in their life. Or we'll touch base maybe once a year on financial planning items that we need to reset on. But our client meeting structure has significantly changed and I think changed for the better. I think we have better relationships with our clients now because we have more frequency of touch with them than we did when we were on to regimented of a meeting schedule. So, just an interesting pivot that I think also has really helped us.

Michael: But I'm fascinated with that response of, okay, we have our advisors, but we just lost a ton of our team infrastructure that actually does all the client support, meeting prep and things that go with it. So let's just make all of our client meetings for the next 3 months a friendly check-in call. Because it sounds like you didn't go to all clients and say, "We're not taking meetings for the next 3 months?"

Stacey: No.

Michael: You just went to all clients and proactively reached out and said, "Hey, I'm just doing a check-in," allow that to effectively be the meeting. So at the end of the check-in, let's schedule your next meeting for many months from now.

Stacey: Yes, exactly.

Michael: And that way, you have very little prep or back office support that your advisors need as you go through that lightweight meeting cycle so you can get through, okay, we're on a light crew until we do the replacements.

Stacey: Correct. Exactly. And that worked well. It worked well. No clients complained or were frustrated or left. And in fact, it taught us a lesson that maybe we should rethink the way that we're servicing clients. The Admired Leadership Program actually does this really, really cool consulting where we had one of the head people from Admired Leadership come in. And instead of doing a session on what the best leaders know about relationships, which is one of the modules in Admired Leadership, they did a session on what the best advisors know about relationships. And we did an entire day retreat where all of our advisors sat and were taught by the people in the Admired Leadership Program on how to have the best relationships with clients and no slides, 6 hours, and not 1 person was on their phone. It was the most engaging session I've literally ever experienced in my life. And she made really compelling arguments about how frequency of touch really needs to trump almost everything else.

And one of the reasons is because clients can't always rate us on our expertise because the reason they're coming to us is because they are not an expert themselves. So it's very hard for them to rate us on the advice that we give. What they can rate us on is responsiveness and caring because they understand that. And so, if you are to adjust your service model to really highlight responsiveness, caring, proactive touch, being a part of their life, you actually are speaking to the things that they know are important and making sure that you never let the advice side falter. But I think, and I know our client referrals have picked up since then. And our quality of relationships that we have with our clients have picked up since then. We held an investor symposium a few weeks ago where 325 people came. And that's up from 250 the year before and up from 140 the year before. So, I see that we're getting a lot more engagement from the people, from our clients and our community. And I think a lot of it's because of this learning lesson that sparked us to really think differently about servicing clients.

What Stacey Wishes She Had Known 5 Years Ago [1:20:22]

Michael: So, what else do you know now you wish you could go back and tell you 4 or 5 years ago as you were on the front end of this stage of the growth?

Stacey: That's such a good question. I think that the lessons I'm learning from Emma Hayes right now, I wish I would have learned those lessons earlier. I think in my earlier development as a leader, I was really focused on being kind and creating an empowering work environment and taking really good care of people. It's hard to explain, but that was a very me-driven perspective, meaning what can I do to invest into others? I think that Emma Hayes' perspective is what can I do for others to believe and invest in themselves? Does that make sense? It's more like me being in the power seat versus my responsibility being to give other people more power and more belief and more care and more love. And I wish that I would have understood that earlier because I think I had good intentions. I was trying to take care of people, but maybe people didn't want to get taken care of. Maybe instead, they just wanted the tools and resources to be their own version of excellence. And that mindset switch, I think, is a really, really important one.

Michael: I was going to ask, so how does that show up in practice for you?

Stacey: I'm much better at asking questions than I was. So before, somebody would come to me with a problem and they would ask me to solve it and I would hero and I would solve it. Now when someone comes to me with a problem, I actively will not answer the question until they work through it themselves. Even when we do education sessions internally for our team, we stopped doing PowerPoint presentations and we started doing interactive case studies. I think the value of people thinking through it, is really, really underused or understated. Most people, especially today, where we have pings and dings and stuff coming at us from all different angles, we're constantly overwhelmed by people who need us. If we don't take the time to think through something, it's going to be hard for us to remember it. It's going to be hard for us to sink in and say, "Oh, I don't want that feeling again or that thing went bad and I don't want it to go bad again." And so even when somebody does something wrong, I'm more open minded to letting them sit in it for a second, feel a little bad about it, and then say, "Okay. How are we going to learn from this and grow and develop?" So I think the number 1 thing that I'm doing in practice that's changing it is I'm just really, really trying to be disciplined to not taking that away from people. I want to give them the gift of thinking through it so then that way, they can accomplish those things and have confidence in those things in the future.

Stacey's Advice For Firm Owners Looking To Build Their Middle-Management Layer [1:23:12]

Michael: So, any other advice you would give maybe firm owners that are at this stage where they're trying to start building out their middle-management layer as an organization and what to be doing or watching out for on their journey?

Stacey: Yeah. I would say the first thing that I would gut check is the 3 avatars that I mentioned, of the managers that seem like they're going to be good managers, but you got some red flags. So the really nice manager, I think, is dangerous. The technical specialist that you promote but doesn't know how to have empathy or develop people or the narcissistic manager that cares very much about their own success more than other people's success. Before you promote somebody to a leadership position, I think gut checking those 3 things...now, those 3 things are actually going to be true for most new managers. Most new managers probably will fall into 1 of those 3 categories.

So the second question you have to ask yourself is what training and development am I going to do to protect them against the negative? So when I described Emma Hayes to you, I described her as really, really nice and kind, people feel very loved by her. And so that's something you could see in a new manager. They're nice and kind and people feel very loved. The question is, are they capable of holding people accountable? Are they capable of elevating people to a level of excellence? If they're not today, are they willing to do the training and are they able to do the training to get there? And so, I would certainly ask yourself those questions about people in leadership and management positions and do they fall into one of these avatars? If they do, can I develop them to be like the empowering manager, the empowering leader or no? And if the answer is no, you just have to be strong enough to not do it. Because in my experience, and I coach the G2 Leadership Program with Philip Palaveev, which is kind of the MBA for running an RIA. And in that program, I get to speak to a lot of people across different organizations. And what I find happens most often is a founder goes 1 of 2 ways. A founder starts a firm, realizes they're a client leader and not a people leader, hires a manager to take care of the people. But if that manager is not a good manager, all they're going to feel is like not seen by the founder. And then you got cultural implosion happening, right.

The second version is a founder decides they don't want to be an advisor anymore, hires advisors to advise the clients. They become a leader, but maybe they haven't even gone through the training on how to be a people leader. So they're struggling because they're in a leadership role, but they don't know how to give feedback. They don't know how to hold people accountable. They have a hard time prioritizing. There's too many cooks in the kitchen. They don't understand a framework by which you run, manage an organization. And that becomes a struggle. And so I think that for most organizations, you have to decide what route you're going on. And I think that that decision generally happens around between 10 and 25 employees. And then depending on the route you go on, you have to decide, am I going to get myself leadership training and development or am I really going to put the effort into training people? And to be honest, I'm biased because I coach for the G2 Leadership Program, that is a very good program. If you have somebody in your firm where you think, "I want to be an advisor. I really want to take care of my clients. I'm a founder who is passionate about this. I need someone else to take care of the rest," I definitely think the G2 Program gives a very, very good framework on how to run an RIA.

Michael: And so, folks who are interested, again, this is episode 418. So if you go to kitces.com/418, we'll have links out to the G2 Leadership Program. Philip Palaveev and Ensemble Practice put it on, on an annual cycle.

What Success Means To Stacey [1:26:44]

Michael: So Stacey, as we wrap up, this is a podcast about success, right? One of the themes always comes up is that word "success" means different things to different people. And so, it sounds like you guys are in this wonderful place with the business coming up on $20 million of revenue, 60-plus team members have doubled in the past couple of years. The business seems in a good place, but better than it was after 20% quit. Business seems in a good place. How do you define success for yourself at this point?

Stacey: Well, I think there's 2 versions of it. So, I have to acknowledge that me, as an individual, becomes me, as a leader in the firm. And so, if I'm thinking about my role in the firm...I am thinking about it from the Emma Hayes perspective of how do I create a winning team? How do I create a team who feels happy to be held accountable, who believes in themselves, who believes in others, who wants to grow and develop to support our clients, to support one another? And so to me, success looks like in a year from now, me confidently saying, this is a winning team. And I think we're very, very close where we are today. And that's very empowering. And that's a very important piece of the pie for me.

The other piece of the pie for me is I think on a personal note, this organization should be able to exist without me. There was a moment about 6 months ago where we had an all-team meeting, and each of the departments brought to the organization the things they wanted to work on over the next year to make us better. And that whole team meeting happened, and I had no part to play in the team meeting. I truly wasn't needed. I didn't need to be there. And there was something very beautiful about that to me, because what that signaled to me was that we had the right people in the right seats, that they were all working towards making this organization grow and develop. We were all serving our clients in much better ways than we'd ever served them before. And there was so much beauty in having an organization that can function without you. And to me, is continuing that journey. I want to empower more people. I want my team to grow in their own success. I want to have more partners, and I want those partners to build personal wealth and be wildly successful themselves. And so continuing on the journey, but from the framework of am I building a winning team and constantly asking myself that, as my OKR, I think that's probably where I am today.

Michael: Very cool. Very cool. Thank you, Stacey, for joining us, for rejoining us on the "Financial Advisor Success" Podcast.

Stacey: This was really great. Thank you so much.

Michael: Thank you.