In graduate school, one of my favorite courses was “Decision Tree Modeling.” For those who know me, there isn’t any apparent correlation between this course and my choice of strategic marketing as a career. But I always enjoyed being in manufacturing plants and determining the ordering process. Now this course was three decades ago, prior to computers (remember punch cards?), but I was always fascinated by the forecasting process. For those who are good at it, it is a great art.
While I never ended up in operations after I graduated business school, I did end up in manufacturing plants. This was always a lot of fun, especially for someone who can orchestrate the workings of a plant to maximize productivity. After my relatively brief stint in packaged goods, I gravitated to financial services, taking a position that involved determining when to deliver new products to the marketplace. In a traditional consumer package product, you are always dependent on R&D, manufacturing, quantitative marketing, etc. In financial services, bringing a product to the market is simpler, but it’s still dependent on testing the mood and economics of the marketplace.
When I worked in corporate environments, I learned that there was a real need for strong communication between marketing and operations. I remember successfully introducing my first banking program, Student Loans, but almost “blowing up the shop.” This is a marketing term for when there is so much demand that the operations department can’t handle it. At our bank, everyone had to put in extra hours to meet the demand—which didn’t exactly endear me with operations. It was and is completely unacceptable for marketing to forecast so incorrectly. This was one of my first rookie mistakes.
I’ve written previously that I still bleed blue from my Citicorp days of working with a highly talented group of colleagues. And, as I gained more experience, my forecasting capabilities greatly improved. Or, if I was wrong, at least I did not blow up the shop. For example, I learned to batch our direct mail/email campaigns so that we didn’t get responses all at once. By dropping mail over a period of time rather than all at once, we could track our response rates and ensure we had the capacity to handle incoming business.
However, forecasting is not an exact science. As I sat in my office this weekend (I should say every weekend lately), I realized that I hadn’t forecasted my staffing needs properly, and our business has begun to outpace our current staffing. Emails are flying 24/7, phone calls are coming in seven days a week, and meetings are piling up. After the relative quiet of the past few years, I recognize that the time has come to hire new employees in the face of increasing business activities.
It occurred to me that when you run your own shop, you’ve got to be a master of many things, including forecasting. But, with fewer assets coming in since the downturn of 2008, it has been difficult to justify adding employees. In a perfect world, I would have been able to hire people well in advance of the new business coming through the door (in corporate settings, I was fortunate to have bosses who agreed to hire in advance of need but they obviously had more dollars and resources at their disposal). But recently, it seemed I woke up one day and found I was working nearly 24/7.
The bottom line is, when you run your own business, any incorrect forecast falls on the CEO’s head. While other staff members contribute immensely, you are eventually responsible for someone not getting the service they expect. And if you haven’t staffed properly, then your employees’ frustrations will be felt by not only your employees but also by their families. After all, the more hours your employees are working, the less time they are spending with their families and the more the CEO endures their wrath.
One of the fortunate outcomes of this current market is that there are plenty of talented people looking for good opportunities. When I put out some advertisements and feelers in the marketplace, I was happily surprised at the level of competency of people who want to leave their corporate positions. We also received very qualified resumes by asking talented young people if they have friends who share their skill set. I have a theory that many people hang out with others who have similar characteristics, so if you know someone you think is talented, it’s a good bet that their friends will also be talented.
Now that we’ve hired one person and have a second person in the queue, the challenge is how to train them efficiently and to make them productive as quickly as possible. Understanding the nuances of the RIA marketplace, or any marketplace for that matter, doesn’t happen overnight.
Similarly, from an advisory firm’s perspective, it’s hard to teach staff members that real people have real problems, regardless of their wealth. If you work in a RIA firm, you are exposed to clients going through either good or bad times. But if you distribute to the RIA channel, such as my firm does, it isn’t as obvious—unless you’ve had the privilege of working in an advisor’s office. To me, not understanding the advisor’s office is one of the big problems for those trying to distribute product to this marketplace.
So as I (and probably many others) embark on increasing staffing, I recognize there is going to be a certain level of frustration. If you want to train someone your way, it can’t be done overnight. On the other hand, that person represents a new perspective and a fresh pair of eyes for your business. And, assuming you’ve hired a really smart person, he or she will potentially deliver a whole new way of rethinking your business model—and that could have very exciting outcomes.
The truth is that new employees are revitalizing to a company’s environment. However, taking the time to train them isn’t always easy (especially if you’re a working manager, which all entrepreneurs are), but the rewards are worth it. But I do wish I could have had the foresight to bring people in when business was at an all-time low so that I could have spent many more hours training. The reality is that you don’t add full-time staff or equivalents unless you can afford it, and managing your pennies is one of the first lessons of being an entrepreneur.
Sadly, the reality is that some of us who were trained on decision tree modeling no longer pay attention to it. Instead, we hire the moment the need is greatest. Ugh.
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