Transcript Session 2 Team Workbook

SESSION TWO
WORKBOOK
Cook,Inc Decisions and
Notes for Modules 1 – 5
Cook, Inc.
BSMARTer
Business Simulation Management
and Relationship Training
Introduction
It’s been a fantastic year for Cook, Inc., yet there is always room to improve to take the firm to the
next level. We wanted to address some pain points identified and felt this was a good time to align
our compensation plan and organizational structure to ensure we meet our goals. All details are
outlined in the following pages, but we wanted to provide a high level summary of the key changes.
In terms of the organizational structure (next page) we are alleviating the pressure on Natalie and
functionally organizing ourselves into lines of business. We successfully transitioned the majority of
clients from Natalie to lead advisors and created a new associate advisor role which develops a career
path for our talented younger advisors. In addition, we have aligned our client service associate team
to report to our COO (hired last year), although they will always work with the same lead and junior
advisor to ensure a deep understanding of our client’s unique needs. We feel we have developed a
strong “bench” and career path for our employees to move along as they progress in their careers.
Natalie maintains 10 clients, to keep in touch with their needs. However, given her responsibilities as
CEO the client load is much lighter.
The partners were feeling strained having to write a check to the bank as we complete the transition
to an independent firm. Therefore, for the duration of the buyback period (two more years) we will
be distributing profits quarterly to the owners based on their pro-rata shares. This should help
alleviate some financial burdens they are feeling. It is clear this distribution plan is only for the next
two years, and we will evaluate the plan moving forward and greater business reinvestments after
that time.
We also have instituted a culture of growth, and have pushed our partners and other firm members
to increase their understanding of the brand. While this will take some time, it is no longer just
Natalie who is the PR machine of the firm. Investments were made to do PR training with the
partners, and also to leverage the resources of Fidelity to ensure our story is consistent, differentiated
and repeatable.
Many other changes outlined in the following pages, we look forward to watching these decisions and
their outcomes as the business continues to be a leader in the industry.
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Cook, Inc.’s
New Organization
Structure
CEO
Natalie Cook
CIO
Lead Advisor
Lead Advisor
COO
Dylan Sanders
Alex Munday
John Bosley
Kelly Garrett
Associate Advisor
Associate Advisor
Jerrod Bustos
Madison Lee
Ike Horak
Client Service
Associate
Maria Haggard
Client Service
Associate
Jenn Cyr
Administrative
Assistant
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MODULE 1
Organizational Structure
and Compensation
Service Team Structure
Draw a picture of your service team structure.
Client
(50 clients)
Lead Advisor
John Bosley
Clients
(47 clients)
Lead Advisor
Alex Munday
Clients
(10 legacy)
CEO
Natalie Cook
Associate
Advisor
Madison Lee
Associate Advisor
Jerrod Bustos
Maria
Haggard
Client Service
Associate
Ike Horak
Client Service Associate
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Shared
resource
brought in as
needed
Service Team Structure
Provide an explanation of your service team structure.
We are moving to a team based approach for client service in an effort to take
the pressure off of Natalie, improve client experience, provide career paths for
employees, and to effectively align resources to meet our mission and vision
statement.
Natalie has transitioned all but 10 of Cook’s Legacy clients to John and Alex who
are now lead advisors. Those clients are also serviced by Jerrod and Ike (see
more information below).
Madison (currently enrolled in CFP program) will be acting as associate advisor
and will be working with John. Jerrod (currently enrolled in CFP program) has
been promoted to associate advisor and is supporting Alex. Both will
eventually be given smaller less complicated clients to start taking the lead on,
and these clients will be the beginnings of their books of business when they
transition to lead advisors.
Dylan will be pulled into client meetings as a shared resource in her capacity of
CIO as needed.
Based on the new org structure realignment, we determined that two admins
were not necessary. Maria was promoted to a client service associate after a
review of her skills to backfill Jerrod’s promotion. Ike remains as the second
client service associate. Maria supports John and Madison while Ike supports
Alex and Jerrod.
Clients are now supported in their comprehensive wealth management plan by
a team of specialists, who have the same sets of clients and deep expertise in
their complex situations.
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Compensation
Benchmarking
Determine base compensation for three employees in your briefing
book. Complete the task using the next two pages.
Position
COO
Salary
Bonus
40% of salary.
Bonus pool is
funded based on
revenue goals. CEO
determines
allocation after
funding amount is
determined.
$175,000
Eligible for Referral
Bonus
(Up to $10 million
$2,500/over $5,000)
Total
Maximum $245,000
Minimum
$175,000
Benchmark
Median
$148, 320
$32,630
$216,000
Benchmark Third
Quartile
$200,104
$52,500
$300,000
See Appendix A for position compensation information
Source: 2013 InvestmentNews/Moss Adams Comp Study
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Compensation
Benchmarking
Determine base compensation for three employees in your briefing
book. Complete the task using the next two pages.
Position
Associate Advisor
Benchmark
Median
Salary
Bonus
Range:
$65,000 $85,000
Eligible for new
business and
retention bonus
pool.
New Business:
Year 1 - 19%
Revenue
Year 2 – 9% of
Revenue
Year 3 – 4% of
Revenue
Servicing:
2% of Revenue
ongoing
$65,000
$9,720
Benchmark Third
$84,000
$15,000
Quartile
See Appendix A for position compensation information
Source: 2013 InvestmentNews/Moss Adams Comp Study
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Total
Maximum Variable
Minimum $65,000
$81,832
$100,813
Compensation
Benchmarking
Determine base compensation for three employees in your briefing
book. Complete the task using the next two pages.
Position
Client Service
Associate
Salary
Bonus
Range
$50,000 $65,000
20% of salary.
Bonus pool is
funded based on
revenue goals.
COO determines
allocation after
funding amount is
determined.
Eligible for Referral
Bonus
(Up to $10 million
$2,500/over $5,000)
Total
Maximum $78,000
Minimum $50,000
Benchmark
Median
$53,000
$5,000
$62,500
Benchmark Third
Quartile
$61,000
$7,000
$72,600
See Appendix A for position compensation information
Source: 2013 InvestmentNews/Moss Adams Comp Study
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Compensation
Benchmarking
Determine base compensation for three employees in your briefing
book. Complete the task using the next two pages.
Position
Administrative
Assistant
Salary
Bonus
Range
$40,000 $55,000
20% of salary.
Bonus pool is
funded based on
revenue goals.
COO determines
allocation after
funding amount is
determined.
Eligible for Referral
Bonus
(Up to $10 million
$2,500/over $5,000)
Total
Maximum $66,000
Minimum $40,000
Benchmark
Median
$37,000
$2,500
$40,000
Benchmark Third
Quartile
$41,750
$4,000
$47,500
See Appendix A for position compensation information
Source: 2013 InvestmentNews/Moss Adams Comp Study
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Compensation
Benchmarking
What changes, if any, will you make to compensation?
Salary consists of 4 components:
- Base salary
- Incentive comp/referral bonus
- Equity (for Partners)
- Bonus Pool Sharing
- Pool is available to all employees who do not have primary or secondary client ownership
- This includes all Ops and Admin employees, CIO (Dylan) and COO (Kelly)
- The bonus pool is funded based on revenues assuming that firm metrics are hit. The
target funding is based on target bonus percentages for each employee * their base salary.
If the firm exceeds the metrics, it is possible to fund the pool at >100% and if the firm
does not hit the metrics, the pool will be funded at <100%
- The bonus pool is distributed based on individual performance relative to job-specific
metrics (a standardized performance evaluation is being instituted)
- We are instituting an incentive comp structure that consists of two components: 1)
sourcing/developing new client assets (this will include referrals from existing clients) and 2)
servicing/retaining existing clients. We are doing this to address a few key issues that the firm is
experiencing:
- By specifically creating a component relative to growth and business development, this
will help us meet our goal of doubling assets within 7 years (requires a CAGR of 20%) and
also to ensure that the partners will see desired ROI on the checks they are writing to
Charleston Bank (to take the firm private) by helping to ensure increasing cash flows and
firm value
- To address the issue of recent client attrition, we are adding a client servicing component
to the incentive comp to ensure a focus on client retention. This will also help with
growth as happy clients are more likely to refer to us
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What changes, if any, will you make to compensation?
The incentive comp plan applies to all primary and secondary client facing advisors
This includes the CEO (Natalie), Lead Advisors (Alex and John) and Associate Advisors
(Madison and Jerrod)
- Sourced business:
- Yr 1: 19% of revenue
- Yr 2: 9% of revenue
- Yr 3: 4% of revenue
- Serviced business (equals client retention)
- 4% of revenue for Lead Advisors and Natalie
- 2% of revenue for Associate Advisors
- Summary of incentive comp payout:
- For new business:
- Yr 1: Total payout = 25% of revenue (19% + 4% LA servicing + 2% Jr Adv servicing)
- Yr 2: Total payout = 15% of revenue (9% + 4% LA servicing + 2% Jr Adv servicing)
- Yr 3: Total payout = 10% of revenue (4% + 4% LA servicing + 2% Jr Adv servicing)
Additionally, to ensure that everyone in the firm is focused on Sales, we are instituting a Referral
Bonus for non-primary or non-secondary facing employees (this applies to all Ops, Admin, CIO and
COO).
Referral bonus:
For clients <$10MM = $2500
For clients >$10MM = $5000
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What changes, if any, will you make to compensation?
- As a few employees transition to this new comp plan, their total comp will be impacted. As a
result, we are offering, one-time end of year bonuses to the following employees to make them
whole:
- Madison – the thought is that by the following year, she will be managing more clients and
getting servicing revenue (and possibly some sourced client revenue)
- Jenn – Jenn will likely be managed out by the new policy of no part-time employees and
as a result of the new comp plan.
- Lastly, we are instituting a new firm policy:
- No part-time employees unless they are a tenured employee transitioning to retirement
- Note: we realize that this policy may cause Jenn to quit and we are ok with this and will
re-hire to fill her position if this occurs
- Junior Advisor Comp
- Base salary = $85K for everyone
- Profit Sharing:
- 25% Bonus target :
- Based on individual performance relative to job-specific metrics (a
standardized performance evaluation will be instituted)
- Operations staff:
- Base salary = $60K for everyone
- Administrative staff:
- Base salary = $50K for everyone
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MODULE 2
Staff Selection and
Performance Management
Performance Evaluation
Design a performance evaluation form. Follow the worksheet.
(20 minutes) This was completed for our client service associates.
Job Factor
Explanation
1. Proficient execution of job
requirements
Must meet the job description
responsibilities such as new account
openings, maintenance, limited or no
trade errors, cashiering, reporting,
reduction of NIGO’s
2. Teamwork
Accountability, new hire onboarding,
training, client satisfaction scores
3. Effectively leveraging technology
CRM, financial planning software,
custodial platform, portfolio
management system
4. Communication
Effectively communicates internally
and externally, professional writing,
5. Professional Development
Continues learning, obtains
professional licenses
Notes
The above form is a generic description, we have developed performance and development plan
documents. They are to be completed for a formal review on an annual basis (tied to merit and
bonus payouts). Semi-annually they will be completed for a six-month review (not tied to merit
increases) to ensure there is an ongoing dialogue. While managers are encouraged to meet with
staff at any time, there must be scheduled monthly 1x1 meetings to review items. The
development portion of the plan is developed by the employee. It must tie to their job
functions, but creates a system where the manager is held responsible for assisting their direct
report in achieving those goals.
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MODULE 3
The Culture of Your Firm
Organizational Culture
Describe the culture of your firm.
What changes would you make? How?
Have been dependent on Natalie for success of the firm
All the our owners have to be leaders of the firm.
All employees need to be held accountable for success of the firm.
They need to do the Firm Story and marketing toolkit
Send all advisors to Elevate your growth workshop.
Create advisory board for the firm
Do thorough training, weekly team meetings, and make sure compensation is line with benchmarks
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MODULE 4
Incentive Compensation
Partner Compensation
Design Advisor Bonus Plan
The incentive comp plan applies to all primary and secondary client facing advisors
This includes the CEO (Natalie), Lead Advisors (Alex and John) and Associate Advisors
(Madison and Jerrod)
- Sourced business:
- Yr 1: 19% of revenue
- Yr 2: 9% of revenue
- Yr 3: 4% of revenue
- Serviced business (equals client retention)
- 4% of revenue for Lead Advisors and Natalie
- 2% of revenue for Associate Advisors
- Summary of incentive comp payout:
- For new business:
- Yr 1: Total payout = 25% of revenue (19% + 4% LA servicing + 2% Jr Adv servicing)
- Yr 2: Total payout = 15% of revenue (9% + 4% LA servicing + 2% Jr Adv servicing)
- Yr 3: Total payout = 10% of revenue (4% + 4% LA servicing + 2% Jr Adv servicing)
Additionally, to ensure that everyone in the firm is focused on Sales, we are instituting a Referral
Bonus for non-primary or non-secondary facing employees (this applies to all Ops, Admin, CIO and
COO).
Referral bonus:
For clients <$10MM = $2500
For clients >$10MM = $5000
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Partner Compensation
Design Advisor Bonus Plan
- Lead Advisor Compensation (Alex and John)
- Base salary = $160K for everyone
- Incentive Comp (2 components):
- Sourced business:
- Yr 1: 19% of revenue
- Yr 2: 9% of revenue
- Yr 3: 4% of revenue
- Serviced business (equals client retention)
- 4% of revenue
- Associate Advisor Compensation (Madison and Jerrod):
- Base salary = $85K for everyone
- Incentive Comp (2 components):
- Sourced business:
- Yr 1: 19% of revenue
- Yr 2: 9% of revenue
- Yr 3: 4% of revenue
- Serviced business (equals client retention)
- 2% of revenue
***To help with firm buy-back from back, for the remaining loan period (2 years) we will distribute
all profits on a pro-rata basis quarterly to match the timing of payments to the bank.***
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MODULE 5
Partner Compensation
Partner Compensation
Set the base compensation for your partners.
- CEO Comp (Natalie):
- Base salary = $200K
- Incentive Comp :
- Sourced business:
- Yr 1: 19% of revenue
- Yr 2: 9% of revenue
- Yr 3: 4% of revenue
- Serviced business (equals client retention)
- 4% of revenue
- Lead Advisor Compensation (Alex and John)
- Base salary = $160K for everyone
- Incentive Comp (2 components):
- Sourced business:
- Yr 1: 19% of revenue
- Yr 2: 9% of revenue
- Yr 3: 4% of revenue
- Serviced business (equals client retention)
- 4% of revenue
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Partner Incentive
Compensation
Create, discuss and define incentive compensation for partners.
CIO Comp (Dylan):
Base salary = $200K
Bonus Pool = 40% target
Incentive comp = referral bonus:
For clients <$10MM = $2500
For clients >$10MM = $5000
Equity = 30%
COO Comp (Kelly):
Base salary = $175K
Bonus Pool = 40% target
Incentive comp = referral bonus:
For clients <$10MM = $2500
For clients >$10MM = $5000
Equity = to be evaluated over time.
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Other Initiatives
Describe any other initiatives you will undertake as a firm. These
may be outside of the scope of compensation and people but may be
important parts of your case.
Initiative
Explanation
1. Branding/PR Training
Communication firm story to
marketplace/all employees
understand
2. Social Media Strategy
Reinforce messaging in target market
3.
Client Survey
Notes
Address attrition, ongoing evaluation
of client feedback
4. Performance Evaluations
Align comp with performance
5. Book Segmentation/Transition
Clients
Reduce reliance on Natalie
6. Pay off Bank in Two Years
Improve employee satisfaction and
moral
7. Institute new comp plan
Align comp with benchmarks and
make sure staff understands
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