Leadership: The Critical Success Factor
After I left the industry, I spent five years with KPMG and fifteen years with EY. My focus was on business development and delivering projects. Clients included life companies, asset managers, consumer and intermediary platforms, practice management solutions, back office technology providers, retail banks, investment banks, networks, intermediary service providers, wealth mangers, Independent and restricted financial advisers and private equity.
Most of my projects related to strategy, M&A and “performance improvement” – usually a euphemism for a redundancy programme. Not projects I enjoyed, having done enough of that in the industry. The projects I really enjoyed were those related to M&A
The teams that the “Big Four” can assemble to run a large due diligence project are awe-inspiring and “reassuringly expensive”: Lawyers, actuaries, accountants, a range of regulatory specialists and many others; including me. My role was usually commercial due diligence. Simple question: Is it likely that this business will achieve the results suggested in the business plan? Simple answer: It depends.
On what does it depend? Years ago, I thought it was easy. A large wealth manager, which projected 20bps payment from the platform it was using, was either deluded, attempting to mislead a purchaser, or both. Equally a large network with a £10m revenue line entitled “Marketing Allowance” was kidding itself or someone else. At the same time a team of completely objective professionals would be sampling files and taking a view on quality of advice. Others would be looking at risk management, technology, client segmentation, investment committee, on-going fees, referrals, use of paraplanners, etc, etc. I thought we covered every base. But the real issue was staring me in the face. The CEO of the business. Let’s call them Francis. I didn’t recognise their importance. Some of the time I didn’t even meet them!
If you are investing in the business you are investing in Francis or a replacement of Francis. And here is the big question: Do you want a leader or a manager or someone who is both?
I have met and also worked with excellent managers and I’ve worked with and been inspired by wonderful leaders. But to be candid, the best leader I have known did not even aspire to be a manager. And the best managers I have known sat behind the desk as opposed to being in front of the team. So I have been trying to work what I would want Francis to be if I wanted to buy the business. And, if you are an owner, maybe ask you to reflect on where you sit at this moment. Are you a leader or a manager? And, if you are a leader and want to stay on; how would you feel being led by whoever buys or invests in your business?
It seems to me that a leader must have a clear vision for the future of the business and the courage to invest their human capital and often their financial capital into turning that vision into reality. Integrity, energy, humility communication skills and the ability to inspire others are also part of this package. By the way, I’ve also noticed that good leaders take pride in the success of their teams and individuals and are comfortable with being challenged. Most important the leader drives the culture of the business. And nowadays, culture is even more important than ever. It defines the business!
Of course, what I have described above is conventional leadership. But success can also be achieved by thought leadership. Arguably, Steve Jobs has built the most successful business in the world by combing conventional leadership with thought leadership. He has said: “Innovation distinguishes between a leader and a follower.” He believes that to get ahead in today’s fast-paced world, a leader must be creative and innovative at the same time. Creative thinking and constant innovation are what makes Amazon stand out from the crowd and make Jobs one of the richest people on the planet.
Great leadership without great management is unlikely to create a successful business. Can great leaders also be great managers? I don’t think so; although they share some of the same qualities. First integrity. Second, communication skills. And third, positivity. But, in my experience, managers tend to be better than leaders when it comes to empathy, team building, listening, delegation, developing talent, bonding with staff and creating processes to ensure that vision is turned into reality. And I think this can apply equally to small financial planning businesses as well as institutions. In the event of a sale when the leader is leaving, retaining the manager can be very important.