What’s your Dunbar Number?
Have you heard of the Dunbar’s Number? If you have, give yourself a pat on your back but have you figured out your ideal Dunbar number yet? If not, as the media screams, “you have read it here first.” .
So, what is this number?
According to Wikipedia, Dunbar’s number is a suggested cognitive limit to the number of people with whom one can maintain stable social relationships. This number was first proposed in the 1990s by British anthropologist Robin Dunbar, who found a correlation between primate brain size and average social group size.
By using the average human brain size and extrapolating from the results of primates, he proposed that humans can comfortably maintain 150 stable relationships.
There is some evidence that brain structure predicts the number of friends one has. Dunbar explained it informally as “the number of people you would not feel embarrassed about joining uninvited for a drink if you happened to bump into them in a bar. “. On the periphery, the number also includes past colleagues, such as high school friends, with whom a person would want to reacquaint themselves with if they met again. Proponents assert that numbers larger than this generally require more restrictive rules, laws, and enforced norms to maintain a stable, cohesive group. It has been proposed to lie between 100 and 250, with a commonly used value of 150.
Now this is simply the number of people with whom one can maintain stable social relationships. Let’s imagine this in the context of our work where our brains would require to cognitively process so many things (financial, technical, behavioral, regulatory) beyond social relationships.
How do you think this would affect the Dunbar number for our industry/profession?
If 150 is a commonly used number for social relationships, what do you think this number will be for you?
Well, that depends.
Before I answer on what it depends on, let me say there is no one right answer to this, but there is certainly a wrong answer.
The number for you in the profession depends on these 4 important aspects (there are more but these are enough to get started).
- Your Value Proposition
- Your Client Experience and Service Model (includes communication, touchpoints, meetings, calls, social meetings and so on)
- The Organization Design and Structure of your firm
- Revenue and Income required for your firm, team and your growth.
If you are offering a high end (including high touch) wealth service (including financial planning), this number is around 60-100 (considering 1 financial professional supported by a team). If you are offering a comprehensive multi-family office service that includes accounting, bookkeeping, real estate management, private investments and many other things, this number will be far lower. On the other hand, if you are offering basic investment services, your Dunbar number can be higher than 100 even going up to 200. I can write a post simply on the permutations and combinations of this number but that is not the point of the post.
If the actual number of relationships a business manages are too high or too low compared to the ideal Dunbar number, then one or more of the above 4 important aspects of the business are usually found to be compromised and the business found to be performing way below it’s true potential.
Thus, the key is to figure out your ideal Dunbar number based on your value proposition and client experience/service model.
Based on my meetings and observations of the practices of so many distributors and advisors across the country, I see that this number is around 250-600 in many practices/firms. In some cases, this number has even exceeded 750-1000. Because of this very high number, service levels are lower than what most customers expect. The most profitable clients subsidize everyone else. The relationships are weaker than what they ought to be. While the relationships are social, I am not sure if they are stable. This is a personal relationship business and thus one of your key assets lies in personal relationships based on trust and respect. The financial professionals are overwhelmed, transactional and there is a clear erosion of value in the firm.
Getting this number right is the first step.
How many amazing relationships can you effectively and efficiently handle?
Once you get this number right, it is absolutely possible to boost this number significantly with process, structure of your team, and technology. If this number is 100 for a high-end wealth service, it is possible to take this to 200-250 without any drop in your value proposition or client experience. Imagine the impact of this on your profitability and scale. Knowing how to do this effectively and efficiently can easily double (or more) your productivity, and profitability while providing real scale for you. Not to mention increased value in your firm. There are many (thousands of) practices in the country today that can achieve all of this by getting their Dunbar number right (first) and then doing what’s necessary to scale this number.
If you need help figuring your Dunbar number or how to scale this number to exponentially increase your value, consider joining our HappyRich Advisor Community (to learn, grow and hold each other accountable) for world class professionals.
P.S. In case you were wondering, what the wrong number is – it is any number that causes a cognitive load on you causing you to not enjoy what you are doing as well as one that does not allow you to build a real personal connection and relationship.