9 Ways to Leverage the Pygmalion Effect: Drive Greater Organizational Success and Raise the Bar for Clients

Setting high standards for your team. It’s crucial in building a client-focused firm – helping foster an interdependent team that consistently achieves excellence for your clients. And it’s not solely about achieving excellence but about creating a culture that thrives on growth, innovation, and superior client service.

As a firm owner, you have a unique opportunity to shape the culture of your business and drive its success by establishing and maintaining high standards. Understanding the Pygmalion effect—particularly through the lens of the McNatt study (2000) and insights from the Harvard Business Review—provides valuable insights into how expectations directly impact performance.

What is the Pygmalion effect?

The Pygmalion effect (i.e., the Rosenthal effect) is a psychological phenomenon in which higher expectations lead to improved performance. Named after the Greek myth of Pygmalion, this concept was first demonstrated in a classroom setting by Robert Rosenthal and Lenore Jacobson in 1968. Students who were expected to perform better by their teachers showed significantly greater academic improvement.

Simply put, a leader's expectations can dramatically impact the performance of team members. When you believe in your team's potential and set high expectations, it creates a self-fulfilling prophecy where employees rise to meet these expectations. Harvard Business Review’s seminal article "Pygmalion in Management" by J. Sterling Livingston, first published in 1969, delves deeper into this effect – explaining how managerial expectations shape employee performance.

More recently, in 2000, a comprehensive meta-analysis exploring the Pygmalion effect in organizational settings was conducted. This analysis consolidated findings from numerous studies on managerial expectations and employees, confirming a clear, positive correlation between high managerial expectations and improved employee outcomes.

Benefits of Setting High Standards

The Pygmalion effect is a simple technique that can transform and strengthen your advisory business in several ways:

• Enhances performance by motivating team members and advisors to exceed basic expectations, which leads to better client outcomes, stronger asset flows, and a culture of growth.

• Increases client satisfaction when advisors go above and beyond in delivering top-notch service that fosters greater trust and loyalty.

• Drives professional development by encouraging continuous learning and professional growth, keeping your team members and advisors at the forefront of industry trends and best practices.

• Attracts and retains talent by setting high standards that signal a commitment to excellence and attract like-minded professionals to your firm.

• Fosters innovation and adaptability by requiring your team to engage in more ‘out-of-the-box’ thinking to solve complex client challenges.

Real-World Applications

Incorporating these nine tips into your firm's culture should improve overall performance and client satisfaction.

1. Lead by Example – Demonstrate the behavior and work ethic you expect from your team. Your commitment to high standards sets the tone for the entire firm.

2. Set Clear and Achievable OKRs – Objectives and Key Results (OKRs) are a goal-setting framework introduced by John Doerr in his book "Measure What Matters." Objectives define what you want to achieve, and key results represent specific, measurable outcomes that indicate whether you’re on track to achieving each objective.

3. Communicate Expectations Clearly – Ensure your team understands the high standards you’re setting and reinforce expectations through regular communication and feedback.

4. Encourage Ongoing Training and Development – Invest in continuous learning opportunities for your advisors. High standards require up-to-date knowledge and skills, so fund access to designations/certifications, workshops, and seminars.

5. Foster a Supportive Environment — Encourage collaboration and support among team members. A positive workplace culture helps team members and advisors feel valued and motivated to meet high expectations.

6. Recognize and Reward Excellence — Acknowledge and reward team members and advisors who meet and exceed high standards. Recognition can be a powerful motivator and reinforce the importance of striving for excellence.

7. Use Constructive Feedback — Provide regular, constructive feedback to help each team member improve. Focus on specific behaviors and outcomes and offer guidance on achieving higher performance levels. Check out Giving Feedback and Advice from a Collaborative Perspective™ on the ClientWise eXchange™ website. This is a valuable tool we use to coach high-performing teams.

8. Encourage Innovation and Risk-Taking – High standards often require innovative approaches and a willingness to take calculated risks. Encourage team members to think creatively and explore new ideas.

9. Monitor and Adjust Standards – Continuously monitor the effectiveness of your high standards and adjust them as needed. Flexibility will ensure standards remain relevant and achievable.

Even implementing one or two of these initiatives can produce demonstrable results. We’ve seen a mid-sized wealth advising firm set high expectations for ongoing education and professional development by implementing a rigorous training program. Client satisfaction and retention quickly began to climb, thanks to advisors becoming more confident in their knowledge and skills and generating better client interactions and outcomes.

Similarly, setting a standard that all financial planners within your firm achieve the coveted Certified Financial Planner (CFP) designation has been shown to significantly enhance a financial advisor's career success – generating 14-33% more income than non-CFP advisors and earning 12% higher compensation than their peers.

Conclusion

Setting high standards is a strategic decision that can drive exceptional performance and greater client satisfaction. By leveraging the Pygmalion effect, you can create a culture where high expectations directly impact the firm’s high performance. Implementing the practical tips outlined above will help you establish and maintain these standards, ensuring your business remains competitive. Embrace the power of expectations and watch your team—and your firm—thrive. For more insights and strategies on empowering your wealth advising firm, visit our blog and join the conversation.

Coaching Questions From This Article

1. What can your firm do next to expand its culture of striving for growth, innovation, and superior client service?

2. How can setting high standards within your wealth advising firm evolve to meet the changing expectations of clients over the next five years?

3. How can you further develop and refine the use of OKRs (Objectives and Key Results) to continuously drive innovation and excellence in your team?

4. How do you envision the Pygmalion effect influencing your firm's culture and performance as the financial landscape evolves?

5. What strategies can be implemented to ensure that your firm's supportive and collaborative environment grows stronger, fostering even greater interdependence among team members for sustained client success?