Several months ago, we received valuable feedback from a long-time client about our article series on the “Great 8” Leadership Virtues.
And that insight led to a powerful ah-ha moment for our company.
It went something like this...
“I enjoy reading your articles on the virtues. And we’ve started applying many of the ideas you write about. But I’m curious. You’re in the financial services business. What does building a virtuous culture have to do with financial services?”
Well … Everything.
That’s because, at Legacy Advisory Partners, we believe that financial strategies—such as company-owned life insurance (COLI), deferred compensation, and supplemental retirement plans—tend to generate the best results within companies that are committed to creating a high-trust, virtuous culture.
Otherwise, for example, you could invest in the most generous incentive plans for retaining top talent but inadvertently promote the wrong behaviors—the vices like greed, territorialism, and egotism—that create a toxic culture, stifle collaboration, and undermine business performance.
A virtuous culture is like healthy soil where the “seeds” (your financial strategies) can truly take hold, grow, and multiply.
So, the more we thought about it, the more we realized that we needed to “connect the dots” for our audience and clients. But how?
What could we do to demonstrate the interdependence between a bold vision, a virtuous culture, and financial planning in a way that shows business owners and executives how they can achieve a sustainable strategic advantage for their company?
That’s when the idea of the 3 Wins began to emerge—a framework that would tie it all together.
What exactly are the 3 Wins? And how can you use this framework to boost your company’s financial performance?
In this article, I’ll give you a 30,000-ft. view of the 3 Wins Framework to show how all the pieces mesh together to generate what we call the Collaboration Effect on Profits. Then, in the coming weeks and months, we’ll drill deeper into these concepts in a series of articles that offer practical strategies and tactics for putting the 3 Wins to work in your business.
Defining the 3 Wins
At Legacy, we believe that a business owner or key shareholder should pursue these 3 Wins simultaneously and reevaluate them consistently to ensure that each Win stays in balance with the others:
- Shareholder (Owner) Win
- Company Win
- Key Leader Win
The challenge has been that traditional financial services tends to focus exclusively on the Shareholder Win without taking into account how company performance and employee success are also integral for owners to achieve their highest financial goals.
In other words, for there to be a genuine Shareholder Win, the company and key leaders need to win, as well.
So, let’s talk about each of the 3 Wins, with an overview of the key financial strategies and tools to help business owners achieve those wins.
1: Shareholder (Owner) Win
As the owner, you don’t take on the risk and invest your time, money and energy in the business just to earn a paycheck. You’re building an asset that you hope someday will become valuable enough to support the kind of lifestyle you would like to live when you’re ready to sell or otherwise transition out of the day-to-day operations of the business.
And that’s the Shareholder Win: Where you’re building a business that’s on track to produce the profits and valuation that will fund your personal financial goals.
Here are the financial strategies that pertain to the Shareholder Win.
This is the starting point—your target. What is the lifestyle you want to have when you transition out of the business? How much money do you need to achieve that lifestyle and be financially independent? And by when do you want to accomplish this?
Your financial independence plan should be customized to your timeframe, income, the amount needed, and current assets—including your company—that you have working for you.
Short-Term Transition Plan
“If something happens to me on the way home today where I’m knocked out of work either temporarily or permanently, what will happen to my business?”
This is an important question to think through—for yourself and your team. If the unforeseen happens, what's your short-term transition plan to keep the business going? You'll want to put that plan in writing.
And what can you do to mitigate your financial risk? This is where key person insurance and disability policies become essential to help cover the potentially significant economic impact on you and the company.
Long-Term Transition Plan
How do you gradually and strategically remove yourself from the company, where it’s no longer dependent upon you to succeed?
What does the company growth model need to look like for you to be ready to transition out of the day-to-day?
And what roles do you need to fill in the company to make the transition as smooth as possible for all stakeholders?
While these may be long-term questions, it's crucial to think about them now so you can begin planning how to make that "Win" happen on your own terms.
2. Corporate Win
For many owners, their company is their most significant investment. So, what does the company need to achieve—i.e., the Corporate Win—for the owner to reach financial independence?
Here’s an overview of financial tools that can help give you that insight.
This is where accurate forecasting becomes critical. And the forecasting tool we use with clients is a 5 to 7-year Growth Template.
The Growth Template helps you see whether or not your company is on track to support the Shareholder Win.
So, if there’s a considerable gap between your company’s projected performance and where it needs to be, now you have insight into where you can improve the business to put it on the right growth trajectory.
The critical thing here is to know your numbers and be intentional and strategic about how you can improve them.
EBIT refers to a firm's earnings (profit) that includes all incomes and expenses (operating and non-operating) except interest and income tax expenses.
Whereas the Growth Template is essentially a profit and loss forecast, the EBIT Budget focuses on the profit numbers from that forecast to provide insight into how much cash can be accumulated near-term and long-term.
Now, you can start planning how you can strategically invest those funds to support the Shareholder, Company, and Key Leader Wins.
Key Leader Retention
Who are the most critical leaders to your company’s long-term success? What’s your strategy for keeping them onboard?
In addition to building a high-trust, virtuous culture to attract strong leaders, consider financial strategies, like long-term incentive plans, to improve your odds of keeping those employees—and reduce the risk of disruption to company operations.
3. Key Leader Win
And this leads us to the Key Leader Win. The idea here is that when you help your key employees achieve their own financial and personal fulfillment goals, they will contribute to the Company Win—and, ultimately, the Shareholder Win.
Here the strategies to keep in mind for achieving the Key Leader Win.
How can the company help key leaders achieve their financial independence goals? What investment vehicles and incentive plans are available to them to put them on the right path?
This is where your communication strategy is critical to ensure those leaders understand all the financial tools they have available to them through the company—with access to expert financial advice on how they can get the most value from those investments.
Otherwise, they might not fully appreciate all that you’re offering, diminishing the appeal of those incentives to keep them on board.
Base Compensation and Bonuses
We usually bring in expert compensation consultants for discussions about base salary and cash bonus compensation for key leaders.
But the important point here is that owners start thinking about compensation and bonuses in light of the 3 Wins. That’s because we’ve seen far too many companies make the mistake of offering discretionary cash bonuses based on the whim of whatever the owner or manager thinks is appropriate at that time.
We recommend being more strategic about bonuses—to ensure they’re performance-based and aligned with the Company and Shareholder Wins.
Fulfilling Life Calling
Is your company a place where key leaders want to be—where they can find genuine meaning and purpose in their work? Does your company promote work-life balance, where they don’t feel like they’re on the verge of burnout? Do your key employees enjoy coming to work?
This is where the “Great 8” leadership virtues become the lynchpin that makes the 3 Wins possible. That’s because you could offer the most generous compensation and benefits plans to attract the best talent. But if you don’t have the right culture that makes your company a great place to work, you’ll eventually lose them—no matter how “golden” the “handcuffs” might be.
The idea here is to flip the “golden handcuffs” strategy on its head, where you build such a virtuous culture where key employees WANT to stay, and not just hang on long enough to get their payday and run. You want them to think, “I can accomplish most everything I need to right here. And I really enjoy my work and the team I work with. Why would I ever go anywhere else?”
The 3 Wins + Virtuous Culture = Collaboration Effect on Profits
The bottom line: When people love where they work and feel appreciated by the company for their performance, that enthusiasm becomes infectious, which raises the energy level and performance of everyone on the team and creates an environment that attracts the best talent and the most profitable customers.
And at Legacy, we call this dynamic the “Collaboration Effect on Profits.”
It starts with defining the Shareholder Win (What does the owner want to accomplish and by when?). Then the Company Win (What does the company need to achieve to support the owner’s financial goals?). And, finally, the Key Leader Win (How can the company help key employees reach their financial goals, which, in turn, will contribute to the Company and Shareholder Wins?).
And when you pursue the 3 Wins in light of the "Great 8" leadership virtues, you'll build a high-trust, high-performance culture. You'll see leadership and rank-and-file employees alike all working together in their optimal roles toward the same vision, reaching a level of collaboration that becomes a force multiplier to achieve breakthrough profits.
In short, EVERYBODY wins.
So stay tuned. Over the coming weeks and months, we will deep dive into these concepts with practical strategies and tactics to help you achieve the 3 Wins in your business.
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About the Author: J. David Harper, Jr. serves as CEO and principal of Legacy Advisory Partners, an Atlanta, Georgia-based firm that provides total retirement plan advisory services that give clients a greater competitive advantage to attract and retain top talent. David is also the author of the book “The Great 8: A New Paradigm for Leadership” that teaches business leaders how they can tap into eight timeless “virtues” to expand their influence and achieve sustainable success for their organizations.