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SESSION TWO WORKBOOK

SESSION TWO WORKBOOK. Decisions and Notes for Modules 1 – 5. BSMARTer Business Simulation Management and Relationship Training. Your Vision. Your Mission. Executive Summary.

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SESSION TWO WORKBOOK

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  1. SESSION TWO WORKBOOK Decisions and Notes for Modules 1 – 5 BSMARTerBusiness Simulation Management and Relationship Training

  2. Your Vision

  3. Your Mission

  4. Executive Summary • In early 2014, we received feedback from our employees that they weren’t completely happy and needed more direction from the management team. Wanting to better understand the issues at hand, the management team decided to hire Boston Consulting Group to do a detailed analysis of our firm and make recommendations to the management team on how to improve firm moral, financials and overall direction of the firm in the coming years. The recommended changes were focused on the following key areas: • Organization Structure • Financial Management • Client Segmentation • Associate Sourcing/Development • Below are the fourchanges we have implemented in the late spring of 2014 based on the consultant’s recommendations: • (1) Organization Structure • Reorganization: • We implemented a reorganization of the firm to create departments with department heads (i.e. Managing Partners and Business Leaders for different functions in the firm). • The overall goals for the reorganization are to achieve cohesiveness, permanent roles within the firm (with corresponding line items for salaries and bonuses) and to ensure employees understand their job responsibilities and functions within the firm.

  5. Executive Summary cont. • Reorganizationcont: • Additionally, we better defined the roles by adding job descriptions and accommodated for a new admin support staff that will need to be implemented in 2015 (Note: See Appendix for detailed Job Descriptions). • New Partner/CFO – Cat Stevens • We also realized we had a key leadership position missing in our firm. As a result, we decided to bring in Cat Stevens as our new CFO/Partner. Cat was a successful EVP from RCP Capital Corp that made her name in M&A. • Cat made a lot of money when RCP Capital went public a few years ago. Cat, in her early 50s, decided to retire at the time of the IPO; however, sitting at home knitting was not as fun as she originally thought, she desperately missed being in the financial business. • She wanted to stay in her home state of Oregon and work at a smaller firm. • Cat Steven’s receiver her MBA at the University of Oregon with Ken Brock and is also a CFA. Cat’s background in the business is a welcome addition to Burns Simpson and fills a gap they were looking for in management. • Due to Cat’s great negotiating skills, she was able to finalize a Partner deal with Burns Simpson under the following terms: • Immediate 16% Partner Shares fully vested for payout

  6. Executive Summary cont. • New Partner/CFO – Cat Stevens cont. • Immediately responsible to assist in paying off the loan with Live Oak with the rest of the partners in her equal 16% ownership share • In order to keep things simple, Cat agreed to the same value Destiny gave their own 16% share back in 2012. If there is ever a liquidity event or the other partners buy her out in the future, her 16% share would reduce her final pay out by the Current Estimated Worth of the 16%. The total current estimated worth of her share is based on Destiny’s original agreement. • Cat Steven’s 16% Share is worth in today’s value = $8.6M (2012 EBITDA $2,146,080 * 6 multiple * 67%) • (2) Financial Management • Burns Simpson Financials • Due to vast amount of changes made to our organization, we felt it was important to add supporting detailed financial explanations for each of our decisions that impacted our bottom line. Please reference the BS Financials document located in the Appendix. Each financial decision has supporting financial worksheet explanations: • 2014 Given Financials • Mid-2014 Financials Forward (through 2020) • Live Oak Loan (Amortization Schedule) • Partner Salary Adjustments • Staff Salary Adjustments • New Business Bonus Plan Explanation

  7. Executive Summary cont. • (3) Client Segmentation • Client Service Support model • Created two different support models for our clients, in order to be more supportive of our larger clients, be efficient with our employee’s time, create room for growth at our current staffing model and build out a support model to be competitive with the younger generation of investors. • Support Models: • Smaller than 500k of investable assets - smaller clients under 500k will have a specific set of services and financial planning assistance to better leverage individuals time for larger clients and new initiatives for the firm going forward (also a solution to compete in the Robo advisor space for younger generations) • Greater than 500k of investable assets - larger clients will be provided with a full suite of financial planning and investment services. Individual Sr. Advisors, Jr advisors and an ops person will be assigned to each larger client • (4) Associate Sourcing/Development • Internship Program • We created an internship program for three purposes: • Employee training/hiring for the future • Create an environment where the current staff and future staff begins to get acclimated and maintain understanding of future generations (builds on the new idea of creating a firm that is being built for generations to come) • Inexpensive support for different areas of the firm • Added a dress code to handle any potential challenges in managing the new interns and younger employees’ choice of clothing at the office

  8. MODULE 1 Organizational Structure and Compensation

  9. Firm Organizational Chart Admin: Two associates

  10. Service Team Structure

  11. Service Team Structure • Service Model for Large • Account Program: • Accounts $500k + • Dedicated managing • partner • Back-up junior advisor • support • Two – four in-person • meetings / year • Full financial planning • engagement • Model and additional • investment customization • Dedicated CSA support • and service model metrics • ABP fee plus an on- • going FP annual fee • Service Model for Small • Account Program: • Accounts < $500k • Dedicated junior • partner • One in-person • meeting / year • Reduced financial • planning model and • services • Model portfolios • Online ongoing service • support model and service • model metrics • ABP fee only – No on- • going FP fee

  12. Compensation Benchmarking See Appendix A for position compensation information Source: 2013 InvestmentNews/Moss Adams Comp Study

  13. Compensation Benchmarking

  14. MODULE 2 Staff Selection and Performance Management

  15. Performance Evaluation

  16. MODULE 3 The Culture of Your Firm

  17. Organizational Culture

  18. MODULE 4 Incentive Compensation

  19. Partner Compensation

  20. Overall Firm Compensation Model

  21. MODULE 5 Partner Compensation

  22. Partner Compensation

  23. Partner Bonus Plan

  24. Other Initiatives

  25. Appendix cont.

  26. Appendix cont.

  27. Appendix cont.

  28. Appendix cont.

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