In this episode, Rob Pyne sits down with Philip Palaveev, CEO of The Ensemble Practice, to explore how leadership in advisory firms must evolve—from founder-led solo acts to collaborative, team-based enterprises. Philip draws on decades of experience consulting with top-performing firms to share vivid metaphors, practical insights, and lived experience on generational transition, leadership development, trust, succession, and the difference between ownership and influence.
LISTEN
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SHOW NOTES
Topics discussed
- Leadership as a backpack: the weight, responsibility, and privilege of leading others
- Transitioning from founder-led to team-based advice models
- Why advice is no longer a solo act
- The challenge of letting go: trust, delegation, and relinquishing control
- Herzberg’s motivator-hygiene theory applied to advisory firm culture
- How to embed vision and purpose in a firm’s DNA
- Building trust through deposits — the trust bank account analogy
- The importance of recognising cultural leaders vs formal titles
- Ownership vs leadership vs management — and why they must be decoupled
- Why succession planning fails and how to make it work
- What G2 leaders really want: painting vs preserving the masterpiece
- Advice for aspiring leaders: don’t wait for permission
Quotes
- “Leadership is not just being in front. It’s carrying the backpack filled with the team’s food, water—and responsibility.”
- “Your job as a founder is not to preserve your painting, but to hand the brush to G2.”
- “The moment your firm is more famous than you are—that’s when you’ve truly scaled leadership.”
- “Trust is a bank account. Deposit, deposit, deposit—because the withdrawals will come.”
- “Management is a title. Leadership is a behaviour.”
Key takeaways
- Embrace a coaching mindset—build teams, not just personal success
- Step back so others can step forward: build leaders by resisting the urge to answer first
- Embed purpose by connecting people to a real mission, not just a PowerPoint vision
- Formalise authority structures early to enable succession
- Separate titles from influence—track your cultural org chart, not just your formal one
- Encourage G2 creativity by allowing new ideas to take shape
- Develop an instinct for pivotal moments—they define your legacy as a leader
Resources
- The Ensemble Practice by Philip Palaveev
- G2: Building the Next Generation by Philip Palaveev
- Start With Why by Simon Sinek
- The Power of Moments by Chip and Dan Heath
- Motivator-Hygiene Theory by Frederick Herzberg
- Quote by Lee Iacocca: “The single biggest reason why talented people don’t succeed is they don’t work well with others.”
TRANSCRIPT
Rob Pyne
Welcome to The Trusted Adviser podcast, where you get a deep dive into the world of financial planning with industry leaders who share their stories of winning and learning as they chart their path to success. This podcast is for the curious. Those of you who like to dig into the detail, and if that sounds like you, get ready to listen and learn, and if you’ve been here a while and you’re getting value from these conversations, I’d really appreciate you subscribing or leaving a review. It helps others discover the podcast and join the conversation. Today, on The Trusted Adviser podcast, I’m joined by someone who has spent his career helping financial advisory firms grow, not just in size, but in leadership depth and team effectiveness. Philip Palaveev is the CEO of The Ensemble Practice. He’s a consultant, an author and a speaker who firmly believes that advice is no longer a solo act. It’s a team sport. We’ll explore how firms can transition from founder led to team based models, and what it really means to lead, and how the next generation of advisors can become co creators of the business’s future. Philip, it’s great to have you on the podcast.
Philip Palaveev
Very much a pleasure. Rob, very much a pleasure. And look forward to this conversation the way you set it up. It sounds fascinating. I can’t wait to be part of it.
Rob Pyne
Well, I had the pleasure of hearing you, Philip, doing the keynote presentation at the dimensional practice management symposium here in Australia, in Sydney a few weeks ago, and during the presentations, you shared a number of vivid metaphors that really stuck with me. One of those was when you described leadership as a big backpack filled with the weight of responsibilities, decisions and the care we have for our teams. So just what personal experiences have shaped your understanding of what leadership really entails, and how can leaders become better at carrying the big backpack or even sharing it.
Philip Palaveev
So leadership is a lot of things, and it’s a lot of things at different times, leadership, perhaps, is situational or circumstantial. Sometimes leadership is a privilege. It’s a sign of status. It’s a sign of prestige. Being a leader means you’re being respected. Being a leader means you have influence, perhaps even you have power. And all of those things are gratifying, and they’re gratifying to the majority of human beings. Most of us seek some position of prominence, some position of status, but at the same time, that’s really what I was trying to illustrate with the notion of the backpack. Most of the time. Leadership is actually more of a burden, and I literally was thinking of a physical backpack, because when my kids were little, my my daughter, she’s going to be back home anytime now, but it’s almost six o’clock here in the States, my family loves to hike. And of course, if you live in Seattle, where I live, you gotta hike. The mountains are right next door. They’re absolutely stunningly beautiful, so we’ll go hiking quite a bit. And both my daughter and my dog insist on being in front of everybody. They really like being in front I mean, both of them want to be in that spot in front of everybody leading the way. Literally, my daughter used to call it being the leader boss. So kind of one of the first things we notice about leadership is exactly that position of being the leader, boss, in front of everybody. You’re saying, Just follow me. Just follow behind me, and I’ll take you there. And you have all of this influence, you have all of this control, but literally this being a hike at the same time, I’m keenly aware that all of the food and all of the water is in my backpack and all of that is in my shoulders. So leadership is not just being in front. Leadership is also carrying everybody else’s supplies and making sure everybody else gets there and taking care of everybody else. And that really is kind of one of the many facets of leadership, and it’s been studied quite a bit. Then in times of crisis, we prefer the type of leadership that’s decisive, that’s prone to action, that’s perhaps innovative or focused on results, but there are also times when we just simply have to take care of each other, and that means listening to each other and understanding each other’s needs and making sure we have the right resources to grow and we have the right support of our teammates and all of these things we need to thrive. Leadership is a lot of things, and most of those things are in the backpack of the leader. They represent some kind of responsibility, some kind of a burden. It could be a physical burden. It could be a burden of time. It could be an emotional burden, but it’s something that does physically weigh you down. Emotionally weighs you down.
Rob Pyne
Yep, the leader, or the leader boss, is the worrier, the one that’s uh, carrying responsibilities. But as you say, there’s pros and cons to it, but it’s the role that people aspire to, and it’s a great insight, because I think people who haven’t yet necessarily achieved that title of leadership don’t always know that there is quite that weight of responsibility that goes with that. But you’ve made a real point here, and your whole approach to advisory firms is all about this idea of a team sport, it’s very much about bringing next generation through and making sure that you’ve written a couple of great books, the ensemble practice being self titled, and then most recent one, g2 building the next generation. So you talk very much about advice being a team sport. What are the most common roadblocks you see that advisory firms are having trying to shift from founder-led businesses to a team based model.
Philip Palaveev
Well, some of these transitions are very normal for any kind of business. My family has always been in business for many generations, and my father started one. He owns a ship building business of all things in the world. And as we speak, he’s transitioning it to my brother, who is taking over the family business. And he’s basically the g2 he is the definition of g2 and it’s really interesting. It’s a very different business. It’s a manufacturing business. But some of these same dynamics exist. John Adams, one of the founding fathers of the United States, says that we will be soldiers so that our sons can be farmers, so that their sons can be poets. And it’s paraphrasing him a little bit, but that notion that the first generation is focused on survival, is focused on fighting for existence, is focused on struggle, perhaps, is very strong with my father as well. It’s strong with every founder generation. It’s that notion that we just gotta fight for it. We gotta go get it, we gotta show initiative, that every challenge is an existential crisis. Everything is urgent. Everything has to be acted on now and then the second generation arrives, and they’re more patient. They’re more systematic. Very often they have advanced degrees in business. They tend to be MBAs. They have very sophisticated spreadsheets, and they act very differently. So literally, my father has some of kind of the same thoughts about my brother. He says, Well, he’s spending too much time with his computer, and not enough time in the factory, not enough time in front of the clients. And this is the same thing you and I hear from the founders in business as well, is the g2 spending too much time in the office, not enough time out there prospecting, not enough time out there seeking clients. So some of these generational transitions are normal, but I think some of that is also kind of very fundamental. Most of our businesses start with someone creating a personal practice. Someone goes out there, somehow collects a bunch of clients, becomes the trusted advisor of those clients, and develops a reputation for doing that pretty well. Give that person 1015, 20 years, and they become somewhat famous in a circle of some kind, some sort of a target market. It could be a town, it could be a certain geography. In my case, that’s a certain industry, the advisory industry, but, but they become famous somewhere, but as a person, and then the transition that’s really needed is to transition that fame, transition that reputation from the person to the business. So somehow my biggest dream is that the phone rings and then we pick it up, and instead of saying, hey, we want to work with Philip, someone on the other end of the line says, hey, I want to work with the ensemble practice. And by the way, who’s Philip? That will be my favorite phone call when my personal reputation becomes less important than the reputation of the business. If that makes sense.
Rob Pyne
It does make sense. And I guess being in leadership, as you are in your business, moving away from needing to feel like you’ve been validated as a leader, because it’s actually really about what the firm is doing, and as you say, recognition as a firm, as opposed to being the individual in that business, that’s the transition. So it’s really giving advice to leaders, to say, try to promote the next generation, make them the star, if you like, and actually transfer that trust into the hands of the next generation.
Philip Palaveev
You are onto something there, you absolutely are. Hitting a very key note in that court, and that’s really the notion of transitioning from validation from your personal results to validation from the team results or the collective results. It’s almost like rather than being the best basketball player, you become the best coach. You no longer play in the game, you no longer have the bow in your hands. You’re no longer the highest scorer, but you are actually the coach of the winning team. And that transition is very counter intuitive, because most advisors start their careers as players, not as coaches. So actually, kind of in the key moment, trusting somebody else, rather than trying to be Michael Jordan or LeBron James and getting the ball in your own hands, that is very counter intuitive. It’s counter intuitive to me as well. I noticed this in meetings with my younger colleagues, because somehow Rob, I now have younger colleagues for most of my career, I used to be somebody’s G too, and then all of a sudden, you look around and go like, Oh, wow. Where did everybody go? And why am I the oldest person in the room? So suddenly, every single one of my colleagues is younger than me. So I noticed the same thing when a client asks a question, the smart thing to do was to actually sit on my hands for about 45 seconds or so before I jump in to answer right, so that my colleagues have a chance to answer first, so that they have a chance to shine. But these 45 seconds when I’m sitting on my hands are really the biggest torture of my life, because all of my training along my instincts are going Speak, speak, speak, speak. Because everything you learn early on in your career is exactly that you should have the spotlight. You should impress the client. You should be the trusted advisor. You should be the one with the answers. So making that mental transition is really very difficult for most advisors, especially those that became entrepreneurs and started their own businesses.
Rob Pyne
Yeah, yeah, you make a great case there for as you So stepping back and and holding. Fire when you feel as though I can answer this question, but really allowing others to step into that space and give them the opportunity. You know, you’ve spoken about John Adams to quote but you’ve also mentioned a few different significant figures in history and quoted them, and one of them was Frederick Herzberg, the behavioural scientist. He talked about the motivator hygiene theory back in the late 50s, according to Herzberg, there are some job factors that result in satisfaction, while there are other job factors that prevent dissatisfaction. I think you were talking about this in the context of pay and purpose, because obviously, pay is one of those things that everyone thinks about when they look at what’s important to them in their role, but purpose is equally important. You spoke of and you emphasise the importance of a living, breathing vision in a business, how do you coach advisory firms to move beyond simply a PowerPoint vision or stuck on the wall, to truly embedding a vision in their culture and, I guess, embodying what the business is going to be about, so that people are buying into more than just their pay packet, but actually what they’re there for, and what Vision they’re trying to help achieve together as a team.
Philip Palaveev
So Herzberg really proposed this theory, and I’m fascinated reading about theories of human motivation, and particularly our motivation in the workplace. So Herzberg proposed this theory that there are two sets of factors, one set of factors he called hygiene factors, and essentially those are the kinds of things that if they’re absent, we will be demotivated. We will be dissatisfied. We will actively be sabotaging the workplace. And those are the kinds of things such as pay, normal pay, or fair pay, some level of job security and some level of safety, literally physical safety in the workplace, which, let’s say, in a manufacturing environment, should not be taken for granted. The absence of those factors simply means that you’re demotivated. You have no chance of being anywhere near any level of motivation. But these are high hygiene factors. They’re not enough to make you motivated. There’s another set of factors that are needed in order for you to be motivated, and those are the kinds of things, such as camaraderie, how you feel about those around you in a sense of purpose and a sense of achievement as well. And that sort of sense of purpose, sense of achievement is something that these days Leadership Theory emphasises a lot. If you read Simon Sinek, which everybody did about five years ago, he talks a lot about of starting with, why? Why do you exist as a business, why do you contribute to the lives of your clients? Why do we get out of bed in the morning? And the notion is very strong that if we contribute to that sense of purpose, sense of belonging, then being part of the firm is not just a job, someplace where you gotta be between nine and five, but it’s part of who you are. It’s part of your identity. It’s part of something that’s very important to you, and the things that are very important to you, you devote some extra time to, you devote some passion to. And that’s really what a lot of leadership theory is trying to sort of entice out of the workforce. Is not just the time, but also the heart, if you will, the heart and soul, the passion being poured into the effort, the kind of passion that we very often reserve for our hobbies, for example, the silly things we would do because we are, let’s say, a runner or a boxer, and I certainly have done some pretty absurd things in the, you know, defense of both of those identities, and the moment you call yourself, let’s say a boxer, then all of a sudden you’re pouring so much more into it, Because that’s not just a hobby. That’s who you are, that’s what you told people about. So that’s kind of basically what leadership theory is trying to do, is that if you being an advisor is such a big part of your identity, particularly you being an advisor in that particular firm is such a great part of your identity, then you will really pour quite a bit into it, the kind of effort that sometimes you see people who, for example, work for Patagonia or Rei, one of these sort of outdoorsy, socially responsible kind of businesses. We have some clients, for example, who are specialised in working with gay and lesbian clients, for example, couples and they have the same sense of mission. Or we have clients who are only investing in socially responsible businesses, and again, they have that sense of mission. Those types of businesses, you certainly see people pushing above and beyond what otherwise they probably would have, and perhaps going above and beyond what they paid to do into another territory of effort. But now, how do you achieve that? I would probably say, Look, you can’t fake it. Actually faking it is very counterproductive. It is exactly the opposite. If you’re trying to fake passion, if you’re trying to fake interest, if you’re trying to fake a cause, first of all, human beings are very perceptive. I think both your clients and your team will very quickly perceive that. But in the presence of that sort of a fake mission, I think you will actually see the exact opposite. You will see, rather than motivation, you will see a lot of demotivation, a lot of politics and a lot of sort of unhealthy behaviour in the workplace. So trying to fake it is not the idea. Trying to search high and low for it is perhaps not the idea as well. It should be something that comes from the inside, something that’s relatively intuitive, something. Very simple, the simple answer to the question of, Why do you love doing this?
Rob Pyne
Yeah, and in fact, you speak about not faking it, and obviously trust is just a core part of leadership, and also just the work we do in our profession. And it’s, to my mind, it’s not that difficult to establish a sense of purpose in the work we do, because we see directly the impact we have on people’s lives and the feedback we get from them is pretty profound, often just to know that we’ve made such a difference to their sense of security, their feeling of independence and peace of mind that goes with it. But speaking of trust, you talk about trust being like a bank account, essentially, what practical things can founders and leaders do to build trust in their team so that the team thinks that this isn’t a fake, this leader, this founder in this business, is actually truly behind the purpose and vision of this business. What do you see people doing to really practically help build that sense of trust in their team.
Philip Palaveev
It helps me, and just simply how my brain works, to think in terms of analogies. And I think of trust almost like a bank account where you make some deposits and when you make some withdrawals, in any human relationship, in any friendship, in any romantic relationship, in any business relationship, you make a bunch of deposits. And deposits are simply the good things you’ve done, the right things you’ve said, The unselfish acts when you help somebody, even though you didn’t have to. And the greater the act, the more unselfish the act, the bigger the deposit. And every time you do that, the balance grows and grows and grows. Unfortunately, like any human being, you’re also gonna make some mistakes. You’re gonna say something that you shouldn’t have said, and perhaps that will hurt someone’s feelings, and that’s a withdrawal. Or you would just do the wrong thing, not because you wanted to, but because, unfortunately, such worth of circumstances, you just didn’t make the right decision. That’s a withdrawal, or you acted selfishly. Because we’re human, and sometimes we do, that’s a withdrawal. But the key is, for as long as your balance is relatively high, withdrawals are possible without going in overdraft. This is sort of the bank account analogy, and that really in my mind, if you’re a leader, the step number one is very obvious. Make as many deposits, as often as you can deposit, deposit, deposit, deposit, because the withdrawals will come. They’re inevitable. In every leadership role, you will make some mistakes in every leadership role. You will make some bad decisions. In every leadership role, you will trust the wrong person, or you will trust the wrong data. So you’re going to need those deposits make them as often as you can and as quickly as you can remember that the biggest deposits, and that’s probably lesson number two, come from you doing something leading by example. In other words, hold yourself to a pretty high standard and lead the way. Whatever behaviour you want others to exhibit, you should be the first to exhibit that whatever you want others to do, you should do twice as much whatever you want others to give up. You should completely give that up as well. In other words, the biggest deposit is when you lead by example, when you do something that you didn’t have to do but you’re expecting others to do, those kinds of deposits will probably last the longest.
Rob Pyne
Yeah, the bank account analogy is a really good one. It’s an easy one to remember, and it’s just focusing on deposits to build that trust, to build that trust bank account. So, yeah, it’s a great way of thinking about it, and helps people to know that withdrawals are going to come, but you want to be depositing.
Philip Palaveev
And I will probably say the third thing, and that’s also important to remember, is that not every moment has the equal weight. There are certain times when your actions speak the loudest. There are certain times when the moment is such that your team will remember what you did. And you just gotta be able to recognise those moments. You gotta have an instinct for those moments. They tend to be pretty obvious. Everyone remembers what you did in a time of big crisis. Some of us probably still remember what we were doing on those days in September 2008 when all of a sudden you turn on the TV and Lehman Brothers is no longer and the American senate is discussing extraordinary measures. And clearly something’s happening. The next couple of months, we remember the action of the leadership of the firm we were part of, because the moment was such. People were getting laid off, people were getting let go. Compensation was dropping throughout the industry. So everyone remembers what happened. So if you see a time of crisis, that’s a time to actually step up as a leader. What you do becomes very, very important. The times of big decisions, and every farmer has a bunch of them are also times to really step up your presence, your support for others. And of course, the expectations are higher. Just basically, there’s a great book called The Power of moments chip and down heat. And they discuss exactly this theory that the way human beings form their perception of an episode or a relationship is not minute by minute on average, it’s really we remember the beginning and the end, the high and the low. We really focus on the emotional highs and emotional lows. So in these moments of challenge, especially the greatest challenges, and these moments of joy when we’re celebrating something, that’s when leadership is needed the most, and because it’s very easy to celebrate, I will probably say. You really become a leader in a time of crisis. You establish your credibility as a leader exactly in a time of crisis. So develop an instinct for those moments and step up in those moments.
Rob Pyne
Yeah, that’s great advice. People will know those moments when they arrive. And as you say, it’s what you do, leading by example, and how you treat others in that situation that really reflects your style of leadership, and whether you are really able to, as you say, line into the moment and step up to it so you make a distinction. Philip about ownership, leadership and management, about the differences between those three things. How can advisory firms structure roles and responsibilities to reflect this reality as they grow?
Philip Palaveev
The difference between ownership, leadership and management is probably a good place to begin. Is kind of defining what each of those may mean. Ownership is simply a legal act. You’re either an owner or you’re not an owner. Much like parenthood, you’re either a parent or you’re not a parent. Kind of most of the time, it’s pretty clear you either are or you are not. The same is true with ownership. That simply means you, at some point in time, either purchased or in some other way, acquired, some legal document certifying your claim to a bunch of profits and a bunch of property. Now in an advisory firm, that usually also means that you are a big part of that firm, that you have a position that’s very important in that farm. So notice, in advisory firms, typically ownership overlaps with management and leadership in the sense that if you’re an owner, you probably hold a high position of authority, and that authority means that you have management responsibilities. Management simply meaning you govern a bunch of people. You tell them what to do, you establish their priorities, establish the resources that you have their disposal, you give them feedback. Those are the kinds of things that constitute management. You manage a result, and at the same time, you’re also responsible for leadership. Leadership being defined not just as getting the result, but also being responsible, more broadly, of the motivation of the team and the constitution of the team, and the broader development of the team and the sense of purpose and enticing that level of effort that perhaps goes above and beyond just the resources supplied and everything else in there. So early on in an advisory firm, the owners are the leaders and the managers. Basically, those three overlap perfectly. But the more the firm grows, the more likely it is that, first of all, we will see some owners who are not managers. We’re gonna have some people who own shares, but they’re not sitting on the executive committee, then we have a C in front of their title, and that’s just fine. That’s perfectly fine. That’s the sign of a large and growing firm, and that’s the sign of a large and growing ownership team. There are also gonna be times when the leaders of the firm are not necessarily owners. And leadership, by the way, is not a title. Management is a title. When it says director of blah blah blah, it probably means you are the manager of blah blah blah. So if it’s the director of planning, you probably have some management responsibilities with respect to planning, but nothing says leader of planners, because leadership is not a title. It’s more how you act. It’s more who you are. I’ll never forget. It’s a rather long anecdote, so I’ll try to shorten it as best as I can. But I was together with the CEO of an acquisitive farm visiting an office they just had acquired, and there were about 25 people in the room, and those 25 were very uncomfortable, and they’re very stressed out because they were worried that they’re not going to have jobs, so the anxiety level was very, very high. But there were two people in the room. I didn’t know who they were, I didn’t know their names, I didn’t know their titles, but there were these two women in the room that were acting very decisively to reassure everyone that things are going to be fine. They were asking good questions, they were making jokes. They were trying to make the environment more relaxed. So it was amazing. They turned the meeting around. In the span of about 60 minutes, they turned the meeting completely around. So we go back to the car, and I’m asking the CEO of the acquisitive farm, the big farm, and asking like, where are these two women that they must be the CEO and the COO of this small farm that you just acquired? He says, You’re absolutely right. One of them is the CEO. The other one is the receptionist, and that really is just sort of an example of how leadership is a behaviour. It’s not a title. So whatever your business card says, or whatever it says under your picture on the website, how you act in the decisive moment that really defines your leadership or not. So conceivably, we can have leaders who are not managers like that receptionist and unfortunately, we can also have managers who are not leaders, and we have probably witnessed that as well, someone who actually has the title but just doesn’t have the behaviour ideally, most of our managers act as leaders, and perhaps are invested as owners in the business. That will make for great alignment of interest. But perfect alignment is perhaps not even desirable. As the firm grows, we can’t have every owner involved in management of the company, and that’s not viable. That’s not desirable either.
Rob Pyne
Have you seen people manage that successfully, where they separate out ownership from that management leadership can be across the business as you say. It doesn’t need a title to be. Leader. In fact, I think you refer to that as the looking at the cultural org chart versus the formal org chart, because the cultural org chart talks about who are the leaders within your business that actually lead culture, and they actually demonstrate leadership without being a manager necessarily, or perhaps even an owner. So do you want to talk about the cultural org chart before we just touch on that point, about making that successful transition where people realise they’re an owner, but not necessarily a manager inside the business, and I guess, responsible for making decisions for the business.
Philip Palaveev
So first of all, the notion of sort of a cultural org chart. This is me freelancing a little bit. It’s my own theory, but it’s probably not a very far fetched observation for anyone who’s spent any amount of time observing businesses. And that’s the fact that every organisation has sort of the official org chart, and that tells you who’s on top of who, who’s the boss of who, who has the reporting responsibilities, who has the resources. But at the same time, when you carefully observe the organisation, you’re going to notice that there’s an unspoken pecking order, that there’s still some sort of an unspoken order of who has importance, whose voice carries the most, who knows where things are, who knows how we do stuff? Who knows how we deploy resources? Who has the year of the CEO? When you follow those lines, those cultural lines, because that’s basically the definition of culture, are sometimes dramatically different than the official org chart. There may be someone who’s appointed the head of the department, but that’s not where people go when they have a problem or they need resources. There may be somebody else. There may be a dotted line from one CEO to another position in the firm, but that’s not who talks to who when the rubber meets the road. So every organisation kind of says this unspoken pecking order, which is not necessarily detrimental. Those two don’t have to overlap, but I think a good leader will be keenly aware and observant of what does the cultural org chart say, How does my team behave? Who else has influence over my team? Not just what does the org chart say.
Rob Pyne
Yeah, and to that point about ownership and management, obviously, I mean, just to reference our own situation, we have now a significant number of owners through an equity trust. And that’s not insignificant amounts of money, like a not $2,000 amount, but it’s significant, people investing significant funds into our business. But that means we’re the big ownership group that’s developing, but obviously still a really, relatively tight management group. How do you see businesses make a successful transition of g1 stepping out of that leadership role, or, I should say, management role, to be more precise, and making sure that there is a natural succession, perhaps cultural leaders are stepping up, that are owners as well, moving into that leadership role, into that management role. I’m just curious about that, because we’ll face that ourselves. We’ve got five current directors, and two of whom are probably within the next five years, looking to transition out of the business. I’m curious really, just from a personal standpoint, how you’ve seen businesses successfully make that transition, where the next generation owners are stepping into management roles and moving into that more executive function, if you like, in the business, have you seen that done really well, and how do they do it?
Philip Palaveev
You know, one step at a time, and most of all, establishing the habit of trusting structures, not just trusting specific people, I think, but the best practice is there, first of all, the founder, or the founders have to, from the beginning, start establishing officers and endowing those officers with authority, meaning, whenever the business grows to a point where we need to establish a team or a department, that we establish that structure and that we formally appoint someone to lead that structure. Kind of a very common mistake that entrepreneurs make is that, for some reason, they believe that no org charts are necessary, that no hierarchy is necessary. And they basically say, Well, why do we need hierarchy? And by that they usually mean, look, I’m the boss of everybody, and there are not going to be any other bosses here. And the only rule is I make the rules so very often, entrepreneurs describe themselves as benevolent dictators. But let me tell you, every dictator probably believes they’re benevolent. So that sort of insistence on lack of hierarchy is exactly that destructive habit of never establishing any other source of authority but themselves. And this is really what I would encourage clients to do, is establish other sources of authority when there’s a team, establish a team leader and give that team leader authority, and then stay away from their decision making authority. In other words, much like when you train your kid to drive a car, you train them as best as you can, and then one day, you give them the keys and say, go drive. The same is true. Is when you establish a team and a team leader, let that leader be a leader. Warren Buffet says that a common mistake people make is they buy a dog and then they do the barking. If you’ve appointed a manager, let that manager manage. Don’t supersede them. Don’t supervise them. Don’t look over their shoulder. Don’t second guess. Them and establish the habit of trusting them, and establish also the habit of the organisation, trusting them and respecting their authority. Authority is not singular. There are many types of authority you need in a farm. Just like leadership is not singular. You need a lot of leaders in the farm. So it should be a gradual process of as we grow, you need as a leader to appoint other leaders and then let them be leaders. Every time you have seven or eight people, you need another team leader. Appoint that leader and get out of their way. Every time you have a million and a half to 2 million in revenue, you need another partner. Appoint that partner and get out of the way just gradually Divest yourself of authority and keep the authority that matters the strategic level authority, and then delegate the rest of the authority to capable people that can execute on your behalf and supervise results, rather than processes that will get the entire organisation in the habit of trusting positions and trusting places in your chart, rather than just looking at You and saying You are the beginning, and yet you are the A and the Z, you are the sole decision making authority in the forum, and you are the only decision maker. That type of habit is why there’s a crisis when the founders retire, because no one has the habit of trusting anybody else.
Rob Pyne
That’s a great insight. Is that the top reason succession planning fails when people are trying to continue to maintain that sort of strangle grip on control of the firm, and not hand authority and control into the hands of other leaders.
Philip Palaveev
Coming through, realistically, it’s kind of one of these adverse selection problems. The kinds of people that start businesses are exactly the types of control freaks that are very unlikely to let go of the reins. You know, Volkswagen had this commercial that says that on the road of life, there are passengers and there are drivers. Drivers want it. That’s basically entrepreneurs for you. They’re the kind of people that want to drive the car. They can never sit on the back seat. They can never sit in the passenger seat, because they gotta decide if we’re going left or we’re going right. Unfortunately, that same drive that causes them to create something out of nothing, which is amazing, is the kind of drive that constantly has them second guessing everybody else and not trusting anybody else, and they just can’t watch somebody else work with their client or work with their business, because they’re just terrible. I used to joke that that’s like watching somebody else dance with my wife. Theoretically, it’s fine, but just doesn’t feel right. So it’s really the nature of entrepreneurs that really badly gets in their way when it comes to succession. The same things that make them successful really Doom them to fail when it comes to transition.
Rob Pyne
Okay, well, you’ve talked about the VW ad. Let’s talk about another person who was prominent in the motor vehicle manufacturing. You shared a quote from Lee Iacocca, who was famous for having the Lord Mustang and being responsible for reviving Chrysler as its CEO. And the quote was the single biggest reason why talented people don’t succeed is because they do not work well with their colleagues. I think you referenced that again in respect to the cultural org chart versus the formal org chart. Can you just speak to that quote and how significant that point is that people, if they don’t succeed, it’s largely because they’re not working well with others.
Philip Palaveev
I think this is kind of a painful realisation that sometimes dawns on young leaders, and it’s exactly this kind of realisation that the future of your career is less dependent on what you do yourself and is more dependent on what you can lead other people into doing and what you can convince others to do on behalf of the organisation you’re leading. If you develop your career as an advisor, most of that career is defined by your own personal ability to work with clients and earn their trust in your knowledge, and then, of course, your ability to develop a reputation and bring clients to the firm. But then the moment you become partner, particularly if you go from partner to some kind of an executive position, if you start leading planning, or you start leading advice for your farm, you start leading business development, or you become the CEO, that’s the time of transition where you no longer dependent just on your own skills. You actually dependent on your ability to get others to do stuff for you. I’ve witnessed too many executives that are this misunderstood genius. They’re very smart, they’re amazing investment people. Everybody says, Oh, they’re so smart, but, and you know the but is coming that they’re amazing, except when no one wants to work with them. They’re amazing, but no one wants to actually have them as their boss, and that means that person is absolutely doomed to fail as a leader, but it’s very often they actually don’t even know it. No one has ever told them that you are actually not that good with playing with other kids, and that lack of self awareness sometimes gets in the way of both their ability to be a leader, but also becomes very detrimental to the entire organisation, because sometimes it’s very difficult internally for someone to say, Hey, you’re brilliant, but you are actually terrible with other people.
Rob Pyne
Do you ever get involved in trying to help people to look in the mirror and see that in themselves, to see that they’re great in some respects, but really falling down in that area, about leading or working with others?
Philip Palaveev
You know, such is the nature of Consultant. Okay, I suspect doctors can probably tell you the same thing that most of the time, you know really what’s the source of most of your problems? It’s just a matter of finding out the goodwill and the determination to work on those problems. And probably more than half of our consultant work really comes from exactly that, that internally, there’s a pretty good understanding of what the problem is. But sometimes someone has to actually say that with an accent, or someone has to actually say that from the outside, so that one person on the team finally hears that because that voice, they have been hearing it internally, but perhaps ignoring it, or they perhaps have been hearing it but not believing it. So sometimes from the outside, it is a little bit more loud and a little bit more clear. As they say in Bulgaria, no one is a prophet in their own village. So a lot of consulting is really repeating things that are well known internally, but no one either has the courage to say them or just has the political power to be recognised.
Rob Pyne
Yeah, that is a useful point to make, because bringing in an external party. And I can reflect on this when you often talk to your children about improving, we’re into a basketball as you are, Philip and and you watch your kids trying to improve, and and often you’ll be telling them what they can do to try and improve, but as soon as someone else doesn’t the same thing, they listen. So that external voice does make a really powerful impact. And you’ve made a distinction there between coaching, which is more individual focused versus consulting, which is very firm focused. How should firms decide what kind of external support they need?
Philip Palaveev
Coaching for individuals or firm level consulting? Yeah, and I think that was a reaction to a question in the audience at that presentation, and you and I shared, and it was really the question I had to do with the differences between coaching and consulting and consulting business. Consulting is with a business, which means that we’re first and foremost asking the question, what’s in the best interest of the business, what’s in the best interest of the organisation, rather than what’s in the best interest of Rob Pyne? And that’s a not just a different angle. Sometimes the answer is dramatically different depending on who we focus on. Now, business coaching, on the other hand, most of the time focuses on the skill set of a specific executive or a specific professional. So someone could coach me on communications, or someone could coach me on leadership, or someone could coach me on business development that’s for my own improvement or the improvement of a specific skill that I have or don’t have as a professional. My profession is business consulting. I don’t work very often individually with people when it comes to coaching, although that’s one of the new things that we’re doing these days, is actually business development coaching, but we’ll probably make that distinction. There’s so much to talk about in terms of business development that actually the temptation would be coaching. That was irresistible. So here I am.
Rob Pyne
Yeah, great. Well, it would be powerful impact you’d have on people, just the experience and the people you’ve interacted with and the learnings you’ve been able to share. Super powerful. But you should another story. I want to just touch on. He talked about one of your business clients, where a founder was describing his vision of the business as a painting. Yeah, was his way of describing his vision. And could you share with the listeners and talk about how founders can practically invite g2 into that creative process of evolving the business? Because there’s a really good story, I thought. So you want to share that with us.
Philip Palaveev
Yeah, very much. It was the story of a study group, and it was a very interesting study group for a couple reasons. The first one being, these were really good farms. They’re still very good farms. This was something like 15 years ago, and these were wonderful farms. 12 of them. I had started a study group, and the CEOs had gotten together and spent some time together exchanging best practices and those kinds of things that study groups do for that particular meeting that I was attending. They had also invited one of their G twos to attend as well. So there are 12 founders and 12 G twos in the room, 24 of them, and I’m facilitating some kind of a dialog. So we’re talking about succession, and one of them, one of the founders, is talking about how he sees his business. And he said something very eloquent. He said, Look, I think of my business as a painting, and if I paint only one painting in my entire life, I want that painting to be a masterpiece. I want it to be hanging on the wall. I want people to admire it for many years to come. I want it to mean something when I’m gone and no one remembers who I am, and we’re all kind of thinking about that and saying, Wow, that was so eloquent. That’s so well put, except for one of the G twos jumps up and she says, No, that’s exactly what’s wrong with your thought process, that you think of us as curators of your museum, that our job is to preserve your painting. And as a matter of fact, we are painters ourselves. We brought our brushes, we bought our paint. We want to continue creating. We’re not done with this painting yet, and that really, fundamentally, kind of opened my eyes, is That’s exactly it. G twos don’t want to just be preserving a legacy. They want to continue building something. They have a bunch of ideas of their own. So when the founders reject those ideas, where they say, that’s not the business we are really, when they reject sort of that creative process, very often, that’s where they. Killed the source of ideas, and then they later complained that the G twos are not entrepreneurial. You know, Rob with all due respect, but if you shoot down the first 10 ideas I bring to you, I am probably not going to bring idea number 11. And that very often, is exactly what happens in a business. Is G twos keep proposing interesting ideas, the founders keep shooting them down, and eventually, someday, they say, Well, why are you not more entrepreneurial? Why are you not bringing any ideas to me? But that is a good way of thinking about the business. Is it’s never done. It’s never complete. Every next generation continues building and creating it.
Rob Pyne
Yeah, I love that story. What advice then would you give to young professionals in advice firms who aspire to leadership? They may be contending with that issue you’re describing there, but they don’t yet have a formal title, but they do aspire to leadership. What advice would you give them?
Philip Palaveev
Most of all, don’t wait. You know, don’t wait for permission, whatever that was. You’re better asking for forgiveness than a permission. You know, if you want to put it that way, if someone’s not giving you the space for you to step into then maybe push them gently. I just put your shoulder on them a little bit. Raise your hand more often. Whenever you hear something that starts with, let’s do blah blah blah. Raise your hand and ask to be the person that makes blah blah blah happen. Be the leader. Volunteer. Jump into it. Take some risk. Take some risk with your reputation. Take some risk with your time. And that’s how you learn, and that’s how you become a leader. If you’re waiting for an appointment, if you’re waiting for permission, if you’re waiting for the resources, if you’re waiting for the perfect time, it sometimes never comes. As a matter of fact, they say that the reason why MBAs never start a business is because, if you really analyse it, it makes no sense. So at some point in time, you kind of have to take that leap of faith and put your shoulder into it and say, Okay, I want to make this happen. I’m going to take the risk of this is going to be my project. Don’t wait. Just don’t wait.
Rob Pyne
That’s great advice. And I think anyone who’s in a firm that has a young leader that’s exhibiting that sort of behaviour everyone can relate to that they know that it’s the person that’s actually taking initiative, stepping up, putting their hand up, stepping forward, to try and improve things for the whole team, and not just for their own self interest. It’s it’s great advice. Have you got any final words of wisdom before we wrap up? Philip, I could talk to you forever when we’ve spent a bit of time together, when you’re here in Sydney and we had a few drinks, few drinks together, and I like could talk for hours and hours, but you’re just back from Europe, you’re a bit jet lagged, and it’s, it’s getting later in the evening there in Seattle. So any final words before we wrap up?
Philip Palaveev
You know, Rob, most of all, just to express my admiration for you and your fellow entrepreneurs in Australia, what an amazing collection of business owners who are building just awesome businesses, and you yourself are such a student of the business, and you’re running your firm so well. I’m also so impressed with Australian firms. They do so much planning. And actually, frankly, American firms kind of forgot about planning a little bit. The markets have been so good that everybody got carried away managing assets. We started not doing enough planning. So it was really fascinating for me to learn more about the business in Australia, because you are approaching it as businesses. You’re approaching it as teams. You’re doing a lot of planning, so you’re doing all the right things that I believe in. Of course, the things I believe in are the right things by definition. But you know, as my father frequently reminds me, he’s still a business owner. He’s turning 80 this year. He’s still “retiring”, as he will put it, notice my air quotes, but as he would put it, if it was easy, everybody would be doing that. It’s not easy, but it’s what we love doing. It is our job, and I wouldn’t have it any other way.
Rob Pyne
Yeah. Well, it was such a pleasure spending some time with you and again talking to you again today, Philip, you know for sharing your expertise, your stories, and metaphors and your lived experience as a leader yourself. You’ve reminded us that leadership is both a responsibility and a privilege, and most importantly, something that’s meant to share. And really, that’s the key theme I’ve taken away from all of our chats. It’s about how to share leadership, how to encourage others to step up and and that’s your whole as I say, whole ethos is around next generation leadership, bringing others through helping others to become their best selves. So it’s been absolute pleasure having you on The Trusted Adviser podcast today. Philip, really appreciate your time.
Philip Palaveev
Same Rob, look forward to the next one.
Rob Pyne
Thanks for tuning into The Trusted Adviser. I hope today’s conversation brought you new insights and inspiration for growing your business. If you enjoyed this episode, please subscribe on your favorite podcast platform, leave a review and share it with others in the industry, and don’t forget to connect with us on LinkedIn for updates on future episodes until next time, keep building trust, embracing innovation and driving success in your practice you.