We are often asked, "What is the most common practice management mistake firms make?" It's a question we've encountered frequently over our two-plus decades of consulting for financial advisory businesses.

Through our extensive experience, we've found that the most significant practice management error advisor-leaders make isn’t about the mechanics of managing a practice; rather, it’s a leadership misstep. Too often, firm leaders reach for quick-fix solutions instead of engaging in the more challenging, introspective work of identifying the true underlying issue—a task that falls squarely on their shoulders. When problems arise, leaders often turn to solutions like a new compensation plan, a fresh marketing strategy, or a revamped sales process, among others.

To illustrate, let’s consider a recent client experience. A firm leader approached Herbers & Company, seeking to update his firm’s partnership compensation plan. His rationale was that it hadn’t been reviewed in a few years, so he tasked us with developing a new plan. We followed our usual process and delivered a plan. However, months later, the plan remained unimplemented.

When we inquired about the delay, the leader hesitated. He couldn't pinpoint why the plan hadn't been put into action; he wasn’t requesting revisions, nor was he providing feedback to move it forward. Sensing a deeper issue, we shifted our approach.

During a meeting, I asked him to imagine he was standing on a balcony, looking down at his business. His response was both surprising and enlightening. Rather than pointing to the need for a revamped compensation plan, he said, “I see partners who have been in conflict for years.”

For this firm, addressing the root of the issue—disunion among the partners—was essential before any compensation or other practice management solution could be effective. The leader’s initial focus on partnership compensation instead of partnership communication and conflict was, in fact, a leadership misstep.

No leader achieves great success alone; they rely on the support of many, both within and outside their firms. But the responsibility of making decisions and owning the consequences rests solely with the leader. If a leader lacks confidence in their decision-making, they might resort to trying various solutions, hoping one sticks. They may seek advice from peers, join study groups, or follow the lead of other partners, all to avoid confronting the real problem.

This is understandable. In psychology, the difficulty in seeing oneself clearly is known as a self-awareness deficit, which can impede personal insight. A similar challenge exists for firm leaders: seeing their business and its goals clearly can be difficult. However, focusing on solutions without first deeply understanding the problems does little to clarify the situation. True practice management success stems from a leader’s commitment to better understanding the root issues.

Financial advisors are accustomed to being experts, offering solutions that enhance their clients’ financial wellbeing. So, it can be difficult for them to shift from being solution providers to problem identifiers. A solution provider might say, “We need a better client experience,” or “We need to acquire a firm,” or “We need a new compensation model for our talent.” On the other hand, a problem identifier might say, “Our close ratio is low,” “We have conflicts among partners,” “We have high employee turnover,” or “Our lead ratio has fallen.” The key is to first identify the problem, then implement the solution—this is the most effective way to address practice management challenges.

Returning to our client, he initially put the cart before the horse by seeking a new partnership compensation plan without recognizing the underlying problem. When the plan failed to take off, he was compelled to identify the real issue. As uncomfortable as it was, this realization provided an opportunity to address the root cause and improve the situation.

In this case, we spent significant time developing a new compensation plan, only to question its lack of implementation months later. It took nearly a full quarter for the leader to admit the real problem. Now, consider this in terms of wasted time and resources. How much could have been saved had the leader focused on identifying the problem rather than jumping to solutions?

Unfortunately, leadership missteps are often the biggest barriers to finding workable solutions to practice management issues. Had the leader chosen to confront the real issue from the start, we likely wouldn’t have spent a quarter on a compensation plan. Instead, that time could have been spent addressing partner communication issues, aligning on strategic goals, and fostering productive conflict resolution.

So, what is the biggest practice management mistake? Remember, behind every great business is great leadership. Leadership is the quality that makes firms stand out. To avoid missteps, commit to enhancing your leadership skills. Don’t just focus on being the all-knowing solution provider. If you develop your problem-identifying skills, many of your practice management challenges may resolve themselves.