session 2 trek workbook v2 final

Trek Enterprises
Decisions and Notes for
Modules 1 – 5
Business Simulation Management
and Relationship Training
Organizational Structure
and Compensation
Service Team Structure
New Org Chart
Jim Kerr
Actively Seeking
Core Admin
2 Reporting Analysts
IT Manager
Jackie Strang
Operations Mgr.
Leo Coy
Monty Cott
Reid Hadnot
Office Manager
2 Accountants
HR Manager –
Actively Seeking
Nyota Hura
Chief Client Exp.
4 Client Teams
14 Lead Advisors
4 Service Advisors
7 Client Service
Jr. Trader –
Actively Seeking
Notes on Reorganization
Given the nature, size and impact of the merger of two firms, we felt the most immediate strategic
priority was to create an organizational structure that would help us address some key issues in the
newly formed organization including:
Technological and process differences
Capacity constraints
Blending investment management models
Clarifying accountability and decision making process
Lack of organizational scale
Compensation differences
We feel that the newly implemented organizational structure with some key functions being
centralized maximizes resources of the firm surrounding our comprehensive Financial Planning
offering (including Investment management, Tax Planning, Retirement Planning, Trust & Estate
Planning, and Financial Planning) which provides for an optimal client experience. Some key
benefits are:
Streamlined decision making and accountability among the senior leadership team. We believe
that organizing under our senior leadership team, each with a clearly designed area of
responsibility would help the organization become much more efficient in making strategic
Clarified roles & responsibilities across the new organization. Clearly defining roles and
responsibilities enables the firm to assign accountability, benchmark performance and
measure individual performance at all levels of the firm.
Preserve and nurture a positive culture of teamwork and mentorship, as well as enhance the
environment to help fuel future growth. Building on our history of teamwork, service and
community involvement, we felt it was critical to preserve an environment that has been so
successful in the past and infuse it with element that rewards future growth.
Better integrate and leverage the strengths and resources of two highly successful firms into a
more efficient organization. Consolidating the operations, technology and administration of
the firm under an experienced COO will enable the firm to operate more efficiently, build scale
and maximize the client experience.
The hiring of an experienced HR manager to oversee all aspects of workforce development and
management including training and development, recruiting and interviewing, salary &
benefits, and to serve as a liaison between Management and employees.
Service Team Structure
Draw a picture of your service team structure.
Lead Advisor
The primary managers of the client relationship and the most
experienced advisors in the firm. Responsibility for managing
existing client relationships and formulating and implementing
advice . Expected to cultivate referrals, develop new client
relationships and supervise the client facing team.
Service Advisor
Responsible for managing existing client relationships in
partnership with the Lead Advisor. They will help formulate and
implement advice and solutions but will rely on technical
specialists and Lead Advisor for decision making.
Performs research, analysis, and manages investment options.
Provides information for the Lead and Service Advisors and
makes recommendations on managers, advisory service
products, investment selection, suitability, and reporting
Responsible for preparing client reports and maintaining contact
with clients to provide or obtain updated information, schedule
meetings and trouble shoot problems. Primary liaison to
operations organization.
Service Team Structure
Provide an explanation of your service team structure.
Our philosophy is to create service teams based on the broad segment of clients we
serve (i.e. Women in Transition, Small Business Owners and High Income Families)
and the products we offer. Staffing of these teams is based on the technical
competencies of each of the team members and how they pertain to each of our
practice areas. We have chosen to adopt a cross-pollination approach to our team
structures to allow for continuing education and mentorship of the junior members of
the team. This is in keeping with one of our key goals for the new firm which is to
provide formal career development, training and mentorship programs for our
employees. The new HR Manager will be critical in establishing these new programs.
Lastly, it will be more challenging for a service team to break-off on their own if
members from the other teams are active participants in their teams.
Determine base compensation for three employees in your briefing
book. Complete the task using the next two pages.
Non-partner lead advisor
Your Lowest-Paid
Your Highest-Paid
Benchmark Third
See Appendix A for position compensation information
Source: 2013 InvestmentNews/Moss Adams Comp Study
Determine base compensation for three employees in your briefing
book. Complete the task using the next two pages.
Non-Partner/Lead Advisor
Your Lowest-Paid
Your Highest-Paid
Benchmark Third
See Appendix A for position compensation information
Source: 2013 InvestmentNews/Moss Adams Comp Study
Determine base compensation for three employees in your briefing
book. Complete the task using the next two pages.
Full Partner1
Your Lowest-Paid
Your Highest-Paid
Benchmark Third
See Appendix A for position compensation information
Source: 2013 InvestmentNews/Moss Adams Comp Study
Full partners have not participated in bonus program prior to 2014
What changes, if any, will you make to compensation?
We are faced with a number of issues relating to our current compensation structure.:
• Employees have always been paid a bonus regardless of firm or individual performance.
• We have never conducted performance evaluations on partners or junior partners.
• While we use a simple form for employees we have never evaluated partner performance.
• Most importantly, there are wide discrepancies between compensation for advisors in the same
role, regardless of tenure, achievement or professional designation
• Trek wrote a compensation policy in 2013 after the merger of the firm, but it is not well
understood nor does it address the issues above.
In a phased approach, we will implement a compensation change designed to normalize salary
bands for junior partner and non-partner advisors over the next 24 months. We are sensitive to our
company’s culture and our advisor morale and want minimize the disrupt ion as much as possible.
As an example:
• Bryce Stogner and Elina Gross are both Non-Advisor/Junior Partners. Bryce has 12 years
experience and is a CFP. He made $240,000 in 2014. Elina has 8 years experience and is a CPA.
She made $100,000 in 2014. We plan on creating a base salary range for this level that ranges
from $100,000 to $140,000. The target incentive bonus for each advisor will be 75% of their
salary. The total comp will range from $170,000 to $245,000. The incentive bonus will be based
on the factors listed on slide 12 with the primary focus on new client acquisition and new flows
from existing clients. The plan would be to reduce Bryce’s salary but increase his bonus over 2
years to allow him to make the same amount of compensation via the variable component.
Staff Selection and
Performance Management
Performance Evaluation
Design a performance evaluation form. Follow the worksheet.
(20 minutes)
Job Factor
1. New Client Acquisition
Trek’s goal is to grow by 12% year over year and all
employees’ performance will be measured, in part, on
their ability to generate referrals and to contribute (in
some way) the growth of the organization.
2. Deepen Client Relationships
Maintaining a high client retention rate and increasing
our share of wallet are critical elements of our
mission. In addition, we will also measure baseline
profitability per relationship relative to the entire client
3. Client Satisfaction
Employing client surveys, we will measure employee
effectiveness and client loyalty with a goal of
achieving a “top 3 box” score on a scale of 0-10 for
90% of our respondents.
4. Mentorship & Collaboration
The merger requires an immediate heightened
attention to employee “inclusion” and senior
management “access”. We will work to ensure open
channels of communication are created and that
employees opinions are valued.
5. Skill Development
Training and ongoing professional development is
critical to grow and challenge employees. We must
also keep up to date on all important regulatory
matters, & professional designations.
6. Team Participation
Bringing two highly successful teams together into
one organization and accomplishing the aggressive
growth and client satisfaction goals we have set for
the firm will only happen if we perform as a cohesive
team. We will strongly encourage and measure our
success through effective communication, teamwork
and partnerships.
Performance Evaluation
Our new performance evaluation form & process provides that every employee will be evaluated on
6 key business factors with varying weightings based on individual job functions. Every employee
will have a set of specific goals established for each job factor. We feel the evolution of the old
performance program to the new one is critical in creating a new sense of shared culture to bring
the new teams together. We are committed to implementing a performance evaluation process
which enables Trek Enterprises to accomplish the following objectives:
1. Fully develop employee potential and improve communication relating to performance.
2. Provide a method to reward employees on a merit basis
3. Improve productivity and the performance of the firm
4. Reinforce Trek’s mission, value and culture of unparalleled performance and professional
The new HR Manager will be instrumental in implementing and rolling out this new program. In
addition, this person will be responsible for designing and rolling out a 360 degree review program
designed to measure the perceived performance of the senior leadership team.
Performance Evaluation
Describe how the forum will be used.
An important part of managing our employee’s performance is establishing goals for the upcoming
year. The purpose of setting these goals is not to detail daily activities, but to help define larger
opportunities and challenges that one will work toward over the upcoming year. To ensure that
employees have effective goals, Trek utilizes Performance Evaluation SMART criteria:
• Specific - The goal should define specific results and provide details on what is to be achieved.
• Measurable - Success must be defined and measured.
• Achievable & Ambitious - Goals should be challenging and go beyond your day-to-day duties
while at the same time be achievable.
• Results-based - State the results to be achieved rather than the activity or work processes leading
to those results.
• Time-bound - Establish a date / time limit. State the date or frequency by which results must
• Creating SMART goals helps everyone clearly understand what is expected from in their role and
to ensure that employees are properly evaluated.
At Trek, we will
• Have a completed performance evaluation for all employees
• Ask employees to complete self-evaluations. We believe feedback from employees on their own
performance provides their perspective and a starting point for the performance discussion.
• Seek feedback from key co-workers. This provides a greater level of detail of interactions.
• Consider if their work expanded in scope or amount of responsibility.
• Judge performance, not potential. Focus on actual contributions and results achieved. This is a
review of “accomplishments”, not of “potential.”
• Measure achievement, not progress.
• Review performance for the entire cycle, not just small periods of time.
The Culture of Your Firm
Organizational Culture
Describe the culture of your firm.
What changes would you make? How?
We have a successful, strong culture which has been built on a customer centric approach from both
firms, there is clearly deep trust, focus on service, and deep client relationships. Decision making
has been done on consensus basis which has lead to inertia. As such, and to move the combined
firm forward, we have created an Office of the CEO. We have also created a reporting hierarchy
below this position that clearly grants each of the members of the “C” suite with the decision
making powers necessary for the successful operations of their teams.
Upon completion of the firm reorganization, TREK has decided to no longer extend Hika’s contract.
TREK has decided that it would be better served if it hired a new CCO, an HR Manager and a Jr.
Trader. We are actively seeking all three of these positions. From the chart found on page 1, it
appears clear as to the role of the CCO and Jr. Trader, which we believe will be important for the
ongoing operations of our firm. The HR Manager’s position will, however, play an immediate,
pivotal role in uniting the two firms.
The merging of the two firms, and their respective cultures, remains a primary focus for our newly
combined firm. The HR Manager will be responsible for putting in place a formal career training and
development program, addressing base compensation and job title issues across the entire
organization, creating a more robust performance appraisal process and establishing a bonus pool
for lead associates that includes a component tied to new business. The HR Manager will also be
responsible for leading TREK’s continued community outreach program, which remains important to
the firm, as well as promoting the firm culture of teamwork that has been established by Leo and
Incentive Compensation
Incentive Compensation
Design Advisor Bonus Plan
As a critical part of normalizing the compensation for all associates and advisors, Trek will
implement an advisor bonus plan which will reward achievement and influence behaviors
consistent with our stated mission, vision and enhances our employee culture.
Based on the eligible bonus pool, each advisor’s bonus payout will be determined relative to a
number of measurable factors (detailed on slide 12 “Performance Evaluation Factors”). As with each
position within the firm, each job factor is weighted according to its relevance within the assigned
role. For the advisor role the key metrics used to determine bonus performance are weighted as
New Client Acquisition: With an aggressive growth goal, cultivating new relationships is a
critical component of each Advisor’s performance.
Deepen Client Relationships: Keeping the clients we have and strengthening their
relationships with an eye on profitability is paramount to maintaining the strong foundation
of the business we have built.
Client Satisfaction: Happy, satisfied clients are less likely to leave and more likely to refer
Mentorship and Collaboration: As leaders within the firm, advisors are expected to be
available resources and accessible leaders to associates throughout the firm.
Skills Development: At a minimum, advisors need to keep their licenses and professional
designations current. The most successful advisors will continue their pursuit of professional
degrees and designations and continue to be a competitive advantage for Trek.
Team Participation: Advisors from both organizations will be instrumental in leading the
integration of the organization and are expected to be proactive leaders in our collaboration
Partner Compensation
Partner Compensation
Set the base compensation for your partners.
With the implementation of the new organization structure, Trek will be implementing anew base
compensation model for its junior and senior partners. All partners will receive a salary and bonus
and participate in the profit sharing (relative to their equity stake and new business contribution).
Junior partner serve as advisors and as such, their base compensation will be part of the
organizational compensation restructuring (as described on slide 10).
Senior partner base compensation is influenced by a number of unique considerations, most notably
that existing senior partners are compensation is currently well above the normal industry
benchmarks. Also, senior partners have never before had clear divisions of labor within either of the
pre-merger firms and they have never been objectively reviewed on any aspect of their
performance. In order to implement a base compensation standard, the senior partners at Trek have
made the following agreements:
• The existing senior partners have agreed to cap their existing base compensation levels for the
next 24 months.
• Each partner will have a clearly defined salary and bonus based on prior year’s compensation
• All senior partners will participate in a 360 degree peer review to evaluate their performance and
review with the rest of the senior leadership team.
• New senior partners in a senior partnership role will be compensated within normal industry
compensation bands (based on experience and past performance)
Two examples to illustrate the methodology:
• Jim Kerr has taken on the CEO role and has a current cash compensation of $650,000. Within the
new system, Jim will take a salary of $430,000 and be eligible for a bonus of $215,000.
• Our soon to be hired COO is expected to be a seasoned veteran with large advisor experience in
very senior roles. As such, we expect to pay a premium to get the top talent in this critical role.
We project the salary to be in the range $150,000-$200,000 with a bonus potential of between
Partner Incentive
Create, discuss and define incentive compensation for partners.
As noted earlier, Trek partners and junior partners participate in a profit sharing program in addition
to their salary and bonus compensation. Participation in the Trek Profit Sharing program is
determined by equity in the firm and new revenue generation. The addition of three new
professionals (COO, HR Manager and Jr. Trader) will shrink the profit sharing pool temporarily. The
senior team views this as a long term investment that will pay great dividends as we accelerate our
growth and increase our profitability going forward.
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.
1. Design and implement a formal
succession plan
The merger and decision to hire an outside C-level
executive has accelerated the need to create and
document a clearly defined succession plan for the
2. Marketing/branding campaign
As indicated in our previous submission, rebranding
the newly formed Trek Enterprises has been a high
priority for our firm. Now is the right time to roll our
new brand out to our clients and the market.
3. Technology & operations integration
Our new COO will be charged with consolidating our
technology platforms and operational processes
across the organization.
4. Assess possible regional
After addressing many of our infrastructure needs,
we again feel it is an optimal time to look at new
business development opportunities.
5. Referral development strategy
Formalize a program and allocate resources to
enhance and accelerate our existing referral efforts.
6. Determine 3-year capital
investment plan
In the post merger environment, we feel it is critical
to evaluate our mid and long term capital
investments to ensure the financial well being of the
firm as it evolves.

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