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One of the reasons I have become such a fan is that the story line and setting (1960's Madison Avenue advertising agency) is chock full of business management and marketing lessons. And given that it takes place in the early 60's, it's interesting to see how approaches to each have changed since then.
The main character, Don Draper (played by Jon Hamm) is a charismatic, talented ad executive who serves as creative director of Sterling Cooper, a fictitious boutique ad agency in New York. Since joining the firm's founders (Roger Sterling and Bert Cooper) he fast become the face of the firm and the person primarily responsible for bringing in new business. He is revered and idolized by all.
In one episode, as Roger Sterling and Don discussed a client pitch that Don didn't want to attend, Roger insisted that he participate because in Roger's words, "Don, you..are Sterling Cooper."
What an incredible thing for someone to say (or hear)! Business models that rely heavily on creativity and relationships (advertising firms, asset managers or wealth managers) often find themselves in situations where an individual (or group of individuals) becomes "the firm". These individuals achieve this untenable position based on their seniority, power, personality or revenue-generating ability. Organizations that become overly-reliant on these "Don Drapers" ultimately face challenges, risks and limitations that will impact the performance and enterprise value of the firm.
Wealth management firms that revolve around their own versions of Don Draper bear significant key person and succession risk. Clients become trained to equate the firm with one individual. When that individual's (planned or unplanned) departure becomes a reality, so too goes the clients and the firm.
Organizations that foster these stars are also limited from a human capital perspective. With a culture that revolves around the talents of a small number of people, these firms tend to have a difficult time attracting new talent. Their recruiting efforts often result in hiring "worker bees" rather than attracting innovative problem solvers that have the ability to grow with the firm, enhance the firm's value proposition and help it remain competitive.
Individual-centric firms also tend to suffer from the "guru effect", where one individual becomes the sole "go to" person for a particular task, like bringing in new business. If an entire organization remains reliant on the talents of one individual, growth becomes impeded by this person's capacity and the ability to scale the business is drastically curtailed.
If a future acquisition or merger is part of your firm's succession strategy, you will find yourself with more plentiful and attractive options if you have made diligent efforts to move beyond a star structure. This often means building a brand and culture that is shaped by founders but eventually permeates your entire organization.
As industries like ours mature, successful wealth management firms will evolve from being overly "people-dependent" organizations to ones that institutionalize their activities, resources and capabilities. Those that don't will find themselves competitively disadvantaged by limited scalability, a brand that lacks persistence, and a risk profile that makes it less attractive to clients, prospects and potential partners or acquirers.