Crisis Lessons from Thrivers Survivors DiversThey are dubbed: The Focus 6. These firms scored...

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Crisis Lessons from Thrivers

Survivors & Divers:

by Jim Ware, CFA, Founder of Focus Consulting Group

FOCUSConsulting Group Inc.FOCUSCONSULTING GROUP INC.

Research on Investment Leadership & Culture

Crisis Lessons from Thrivers, Divers, and Survivors FOCUSConsulting Group Inc.FOCUSCONSULTING GROUP INC.

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Executive Summary

1. Key questions:

Which asset managers survived the crisis in the best shape?

What factors separated the “thrivers” from the mere “survivors”?

What leadership and culture factors explained their success?

What lessons are available to asset management leaders?

2. Key findings:

Fromafieldof60assetmanagementfirms,sixwereidentifiedassuperiorperformersduringthecrisis.Theyaredubbed:TheFocus6.Thesefirmsscoredsignificantlybetterinkeyleadershipandculturefactors,supportingourthesisthatleadershipandcultureareimportantfactorsinaninvestmentfirm’ssustainablesuccess.TheresearchshowsthattheFocus6werestrongerinalltheseareas:

Cohesiveandalignedcultures.

Leadershipandteamworkattheseniorlevel,withsignificantlyhigherscoresfor:

Trustandrespect

Rightteammemberstoachievegoals

Opendebate

Faircompensation

Less“sludge”(i.e.,negativebehaviorsandattitudes)inthesystem.

Abilitytoattractandretaintoptalent.

Developmentoftalent.

Creationofownermentalitywithstaff.

Execution.

Communication.

Commitmenttovaluesof:professional,excellence/continuousimprovement,andethical/integrity.

3. Key takeaways:

Trustandrespectarethefuelofhighperformingteams.

Therightteammembersintherightrolesiscritical.

Candorisessentialtohighqualitydecisionmaking.

Focus6firmsaredriventocontinuallyimproveandreachforexcellence.

Focus6firmleadersdemonstrateahigherlevelofself-awareness.

Focus6firmsrecognizethepowerofaligningpeoplewithnaturalabilities.

TheculturesoftheFocus6supporteffectivedecisionmaking.

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“The phrase, ‘Never waste a

good crisis’ has been uttered

by many people in reference

to the global financial crisis

(GFC). In our case, we believe

that the deeper the crisis,

the better the lessons.”

- Focus Consulting Group (FCG)


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ExecutiveSummary,�

Introduction,5

Importanceofculture:values,beliefs,

andbehaviors,6

Aspirationalculture:whatdoesour

preferredculturelooklike?1�

Culturesummary:cohesionandalignment,1�

Sludge:negativebehaviorsthat

slowdownthesystem,1�

Successfactors:thecharacteristicsof

successfulassetmanagementfirms,16

Strongculture:whatmindsetsand

attitudesdoesitsupport?,19

Leadershipteams:

keysuccessfactors,�0

Emotionalintelligence:Focus6show

anabsenceofblindspots,��

Autopsy:thedeathofafirm,��

Lessonslearned:whatarethetakeaways?�7

Conclusion,�1

AppendixA:methodologyfor

writingthiswhitepaper,��

AppendixB:Focus6versusTheInvestment

industry:criteriaforchoosingtheFocus6,�5

AppendixC:Focus6versusTheInvestment

industry:criteriaforchoosingtheFocus6,�7

AppendixD:additionalcomparisons

betweenFocus6andIndustry,�8

Endnotes,�0

FocusConsultingoverview,�1

Crisis Lessons from Thrivers, Survivors & Divers:Research on Investment Leadership & Culture

Copyright © 2010 by Focus Consulting Group. All rights reserved. Reproduction without attribution is prohibited.

Contents

Focus Consulting Group is the recognized expert for helping investment leaders leverage talent, specifically in the areas of leadership, culture, teamwork, and coaching. We encourage you to visit our website, and sign up for our distribution list: www.focusCgroup.com

FOCUSConsulting Group Inc.FOCUSCONSULTING GROUP INC.


5

Introduction

Thephrase,“Neverwasteagoodcrisis”hasbeen

utteredbymanypeopleinreferencetotheglobal

financialcrisis(GFC).Inourcase,webelievethat

thedeeperthecrisis,thebetterthelessons.The

crisisallowedustolookattheleadershipand

culturesofassetmanagersundertheultimatestress

test.Wegroupedthefirmsinthreecategories:

1. Thrivers: thefirmsthatsailedthroughthecrisis.We

haveidentifiedsixandcallthemtheFocus6.

�. Survivors: firmsthatsurvivedbutdidnotfareaswell

astheThrivers.

�. Divers:oneofthefirmsinourdatabasesank(closed

itsdoors)twomonthsaftertakingthesurvey.

Regardlessofwhichboatyouwerein,the

opportunityforprofoundlessonswasrich.

Inthewinterandspringof�010,Focus

Consultingundertookanextensiveresearch

projecttoanswerthesequestions:

Whichassetmanagerssurvivedthe

crisisinthebestshape?

WhatfactorsseparatedtheThrivers

fromthemereSurvivors?

Whatleadershipandculturefactors

explainedtheirsuccess?

Whatlessonsareavailabletoasset

managementleaders?

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Themethodologyforourresearchis

containedintheappendixtothispaper,but

someofthehighlightsareasfollows:

Fifty-eightsurveysoncultureandleadership

fromassetmanagementfirms.

In-depthdebriefinginterviewsconductedwithallthe

leadershipand/orleadershipteamsofthesefirms.

SixfirmsidentifiedasThriversduring

thecrisis;dubbedthe“Focus6“.

Threestatisticalexpertsassistedinthedesignof

thesurveyandinterpretationofthesurveyresults.

Thirty-fourFocusAdvisoryBoardmembers

(investmentleaders)reviewedthepreliminarydata.

TenFocusConsultantsreadand

editedthefinalwhitepaper.

Webelievethatthispaperrepresentsthemost

comprehensivestudyavailableonthestateofleadership

andcultureintheassetmanagementindustrytoday.Our

approachwastocollectandstudythedataandthen

letthemdothetalking.Manypunditshaveweighed

inwiththeirobservationsandanecdotesaboutthe

lessonsfromthecrisis,butthispaperleadswiththe

facts.Wewillalsoaddourinterpretationaboutwhat

thesefactsmean,butourapproachisdatadriven.

Tobeclear,wearenotaddressingthelessonsabout

markets,financialimplications,reputationalrisk,credit

risk,liquidityconcerns,andthelike.Thispaperisabout

leadershipandculture,the“people”partofthefour

P’s(Philosophy,Process,Performance,andPeople).

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6

Theresultsofthispapermatterbecauseclients

andconsultantslookforthefollowingasleading

indicatorsofperformanceforinvestmentmanagers:

Organizationalstability(retentionofkeytalent).

Strongandhealthycultures.

Sensiblecompensationstructures.

Strong,focusedleadership.

Clearandcompellinginvestmentprocesses

bornofstabilityandlong-termview.

Thefirmsweselectedastheelitegroupthatbest

survivedthecrisis(theFocus6)succeededin

keepingthesefactorsstrongintheirorganizations.

Fromthefirmsresearched,weselectedasthe

elitegroupfirmsthatmetthesekeymetrics:

Employeeswere“ravingfans”oftheirfirm(Loyalty

Factor>50%;seeappendixfordefinitions).

Strongconfidence(SuccessFactor>50%;

morethanhalfoftheemployeesplacedtheir

firminthetopdecileversuscompetitors).

Lowincidenceofnegativebehaviors(measured

by“sludgefactor”oflessthan5%).

Culturesupportseffectivedecision

making(employeesagreed>50%).

Tosummarize,theeliteFocus6firmswerepopulatedwith

employeeswhoemergedfromthecrisisfeelingloyalto

thefirm,confidentofthefirm’songoingsuccess,largely

freeofnegativebehaviorsandattitudes,andsupported

bythecultureintheirquesttomakehigh-quality,effective

decisions.Note:TheseFocus6elitefirmsdidnotescape

thehardshipsofthedownturn.Someofthemsuffered

lossofclients,lowerAUM,andinsomecaseslayoffs.

Theobviousquestionbecomes:Whatishappeningin

thesefirmsthatcreatesexcellentresultseveninthe

worstoftimes?Welooktothedatatoprovideanswers.

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Importance of culture: values, beliefs, and behaviors

Inoursurveyworkwithinvestmentfirms,wehave

definedanddiscussedculture(values,beliefs,

andbehaviorsofafirm)toroomsofinvestment

professionalsandthenasked,“Doesculturematter

tosuccess?”Someoftheresultsareasfollows:

Eighty CFA members during a speech

in Singapore

Culture is important to an investment firm’s

success.

60%

�0%

0%

1 2 3 4 5

Strongly Neutral Strongly Agree Disagree

0% 0%


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Sixty IT leaders from investment

firms, U.S. Delegates Roundtable


success.

0%

1 2 3 4 5


0%

61%

�9%

11%

One hundred investment professionals

at SEI client conference


success.

69%

�0%

�% 0%

1 2 3 4 5


0%

Basedonthesedata,supportedbyadvicefromindustry

leaderslikeCharlieEllis—“inthelongrun,culture

dominates”—wesuggestthatagoodplacetostartthe

analysisofinvestmentfirmsiswiththeirculture:What

istheDNAofthetypicalassetmanagementfirm?We

callthistheirDNAbecausewehaveseenthatthese

aretheculturalbuildingblocksofsuccessforthis

industry.Thetopvalues—basedonpercentageof

employeesvotingfortheminouronline,confidential

survey(10votesfor7�values)—areasfollows:

Theaggregatedataforthisculturequestionisasfollows:

Is culture important to success? “Strongly

agree” or “agree” percentage

“Neutral” or “disagree”

percentage

Cultureisimportanttoan

investmentfirm’ssuccess.

9�% 7%


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Question for respondents: Which

values/behaviors best describe the

current culture at your firm?

(73 choices)

Value/behavior Percent of employees

voting for this value

(avg. across all firms)

Clientsatisfaction 50%

Professional �5%

Ethical/Integrity �0%

Collaboration/Teamwork ��%

Intelligent �9%

Analytic/Research

oriented

�8%

Accountability/

Responsibility

�8%

Balance(home/work) �7%

Excellence/Continuous

improvement

�6%

Resultsoriented �6%

Profit/Financialsuccess �5%

Long-term

perspective/Vision

��%

Respect ��%

Competence ��%

Loyalty �1%

Havingexaminedhundredsoftheseculturesurveys,

wecanattestthatmostfirmssharethesameDNA,that

is,thesamesetofvalues.Interestingly,though,every

singleoneofthe7�choicesreceivesatleastafewvotes.

(Ironically,thelowestvote-getterofallis“rebellious,

mavericks,”whichsomewouldargueistheessenceofthe

industry!)Whenoneskimsthislistofvalues/behaviors

fortheinvestmentindustry,noneofthempopsout

asunusualoroutofplace.Thepossibleexceptionis

“Balance(home/work).”Indeed,thatvaluewaswellbelow

theradar10yearsagowhenFocusstarteditssurvey

work.Inourinterviews,webecameconvincedthatthe

entranceofmillennials(GenYers)andGenXersintothe

workforceexplainsthis“new”value.Babyboomerswere

lessconcernedaboutfindingthisbalance,whereas

youngeragegroupsplaceamuchhighervalueonit.

Thoughfewleadersarguedthatthevaluesinthe

precedinglistrepresenttheDNAoftheinvestment

industry,manywerepuzzled—evenshocked—atthelow

percentagesgiventosuchvaluesas“Clientsatisfaction”

or“Ethical/Integrity.”Afterall,theyreasoned,aren’tthose

twovaluesthebackboneoftheindustry?Shouldn’tevery

employeecheckthoseboxesinthesurvey?Again,the

follow-upinterviewsprovedusefulbecausewelearned

thatmostrespondentsdidindeedagreethatthesevalues

werecore—socorethatsomemanyrespondentsdidnot

evenconsider“wasting”oneoftheir10votesonthem.A

slightlydifferentexplanationcamefrompeoplewhosaid,

“Igreatlyvaluemyexcellenthealth,butIwouldn’tthink

tosayitunlessI’dhadarecentboutofillness.Iguess

wetakeclientsandethicsabitforgrantedatourfirm.”

ArethevalueschosenbytheFocus6(i.e.,thetop

firms)differentfromthosechosenbyotherinvestment

firms?No.Theyarelargelythesame;theimportant

differenceisinmagnitude.Thefollowingchartshows

thesametop15valuesrankedbythedifference

betweenthepercentageofemployeesvotingfora

givenvalueattheFocus6andtheindustryingeneral.


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Value/behavior Focus 6

(percent of

employees voting

for this value)

Industry Average

(for comparable size

non-Focus 6 firms)

Difference

Professional 55% ��% 1�%


improvement

�6% ��% 1�%

Competence �1% 19% 1�%

Ethical/Integrity �9% �7% 1�%

Positive ��% 1�% 10%

Profit/Financialsuccess ��% ��% 9%

Clientsatisfaction 56% �8% 8%

Long-term

perspective/Vision

�0% ��% 8%

Respect �6% �0% 6%

Accountability/

Responsibility

�1% �7% �%

Balance(home/work) �0% �7% �%

Collaboration/

Teamwork

�6% ��% �%

Resultsoriented ��% �7% -�%

KEY:Thesevaluesshowedthebiggestgapsbetweenthecurrentcultures(i.e.,whatistruetoday)oftheFocus6

andtherestoftheindustry.


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Whenviewedthisway,itappearsthatFocus6firms

havewoventhesevaluesdeeperintothefabricofthe

firm.TheFocus6placedamuchstrongeremphasis

on“Professional,”indicatingthatthecultureof

professionalismwasmorethoroughlyingrainedintheir

staffs.Thesameistrueof“Ethical/Integrity”and“Client

satisfaction”:eachisacoreelementofanyinvestment

firm’sDNA,butarguablytheyaremorepracticedinthe

Focus6.AtForestInvestmentAssociates,oneofthe

Focus6firms,thepercentofstaffvotingforthevalue

“Professional”was8�%,nearlytwicetheindustryaverage.

Whenaskedaboutthis,MichaelKelly,theleaderofForest

InvestmentAssociates,responded,“Weworkhardto

developaprofessionalenvironment,whereclientservice

responsibilitiesaresharedbyeveryoneacrosstheboard.

Wepracticeopencommunicationandshareallclient

reviews—goodorbad—witheveryoneinthefirm.And

wepromotefromwithinsothatourculturestaysintact.”

Onapercentagebasis,thesecond-rateddifference—

Excellence/Continuousimprovement—ismorethan50%

greaterinmagnitudeforFocus6firms.Inourview,this

isoneofthefirstpowerfulinsightsfromthedata.The

firmsthatmadeitthroughthecrisisinthebestshape

arenaturallycommittedtoongoingimprovement.One

oftheFocus6leaderssaid,“Inaweirdway,welookedat

thecrisisasanopportunitytoseehowgoodwereally

were.Idon’tmeanthatinanarrogantsense,butas

arealtestofouradaptability.”Ratherthanbecoming

fearful,theFocus6maintainedamorepositiveand

hopefuloutlook,asseeninthefifthvalueinthechart.

RemainingpositivehelpedtheFocus6firmsavoidthe

predictablereactionstofear:fight,flight,freeze,orfaint.

Indeed,asnotedearlier,the“sludge”factors—which

aredrivenbyfear—weremuchlowerfortheFocus6.

Stillonthetopicof“Excellence/Continuousimprovement,”

oneleaderataFocus6firmacknowledgesAndrewLoand

“...client service responsibilities are shared

by everyone across the board. We practice

open communication and share all client

reviews—good or bad—with everyone

in the firm. And we promote from within

so that our culture stays intact.”


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hisAdaptiveMarketHypothesis.Lobelievesthatmarkets

arecontinuallychangingandadaptingtoinvestment

strategiesandapproaches.Inthesamewaythatpoker

playersorsportscoachessizeuptheircompetition

andthenadjust,sodotheplayersinthemarket.In

aggregate,then,themarketsaregettingsmarter.Tostay

ontop,investmentfirmsmustcontinuallyimprove.

Anotherdifferentialappearedwiththevalueof

“Profit/Financialsuccess,”whichindicatesthatthe

Focus6keptasharpeyeonfinancesduringthecrisis.

Whatwelearned,though,isthattighterexpenses

didnottranslateintosubstantiallayoffs.Oneofour

Focus6firms,SnowCapital,explaineditthisway.:

“In January of 2009, we did lay off 4 people from our

staff of 40, but we immediately followed up with a

statement to the remaining team that we did not

anticipate any more staff reductions. We were very

open and transparent about the pressures on our

business. I think the staff appreciated our candor,

and fortunately we were able to deliver on our

promise to maintain the work force after that initial

round of cuts” (Carl Vuono, COO, Snow Capital).”

TheexplanationseemsstraightoutofMaslow’shierarchy

ofneeds:survivalisthefirstconsiderationwhenaperson

isthreatened.Duringthecrisis,manyfirmswereslowto

reactinthisregard,foravarietyofreasons,whereasthe

Focus6tookappropriatestepstomanagefinances,as

inthecaseofSnow.Theseleadershipdecisions,taken

tomakesurethatsurvivalwasassured,helpedreduce

fearintheorganization—andfear,aswewilldiscusslater

inthepaper,isthedriverofmanynegativebehaviors.

AnotherFocus6leader,TedAronsonatAJO,explained

hisviewofprofit/financialsuccessthisway:

“We try to maintain the same behaviors and

attitudes during lean and lush times. Because

we weren’t overextended financially, we did not

panic during the crisis. Over 25 years, we’ve built

a strong and balanced organization that is very

transparent. All of our client correspondence

is available to anyone in the firm to read. We

believe that openness builds trust.”

MichaelKellyofForest,said,

“Our revenues and profits were certainly affected

by the downturn, but we did not have to lay

anyone off. We reassured our team that their

jobs were secure because the long-term prospects

in our view are good. In 2010 we’ve added two

people to bring our employee number to 48.”

Long-termperspective/visionistheantidoteto

“short-termism.”Duringthecrisis,wesawtheshort-

termmonsterrearitsuglyheadquiteoften.(See

sectionon“SludgeFactors”formoreonthis.)It’sno

surprise,then,thattheFocus6paidsignificantlymore

attentiontomaintainingthelong-termperspective

andviewedexpensemanagementwithalonger-term

lens(especiallythemanagementofhumancapital).

Finally,thoughthevaluesof“Trust/Sincerity,”“Candor/

Honesty/Open,”and“Curiosity/Opentonewideas”

didnotmakethetop15valuesinthevoting—and

thereforewerenotpartoftheanalysis—ineachcase

thedifferenceinthesekeybehaviorswasmuchhigher

forFocus6teams.Basedonourresearchintothe

benefitsofpracticingthesekeybehaviors,wearenot

surprisedthattheyweremoreinevidenceatthetop

firms.SeveralFocus6leaderssaidthattheirmantra

duringthecrisiswas:Communicate,communicate,

communicate.Byovercommunicatingduringthecrisis,

theseleadersavoidedthebadoutcomeoftheoldjoke:

Threeold-timersonaparkbench:

1stguy:Todayiswindy.

�ndguy:No,it’sThursday.

�rdguy:SoamI,let’sgetadrink.

TedAronson,asindicatedearlier,providesopen

accesstoallclientcommunications,soany

employeehasaccess.Aronsoncommented,


1�

“It’s not sufficient

to have one person

on your team who

is a truth teller.

Everyone on the

team must be candid

in sharing the entire

truth. No matter

how painful it is.” 2

“Outsidepeoplethinkwe’recrazytodothat,butit’s

nevercomebacktohauntus.Itbuildstrustbyhaving

completetransparency.”MichaelKellyechoedthe

samepolicyofopencommunicationatForest.

Asakeydriverinhealthyandproductiverelationships,

effectiveleadersunderstandthevalueofleadingby

example.Thisauthenticityhelpsreducefearinthe

firmasemployeesbetterunderstandthecurrent

reality:wheretheystand,wherethefirmisgoing,and

whatthefutureholds.ScottPowersatSSgAisskilled

atkeepingthetopprioritiesandaccountabilities

“frontandcenter”duringbothgoodandbadtimes.

Hisstaffclaims,“Itkeepsusfocusedandreducesfear.”

Reducedfeartranslatesintoincreasedproductivity.

Coincidentally,leadershipteamsthatembracedand

practicedthemosteffectivebehaviors—liketrust,candor,

andaccountability—foundthattheirteamsdid,too.

Leadingbyexampleprovedtobethemostpowerful

techniqueformaintainingstrong,cohesivecultures.

Leaders,especiallyduringthecrisis,mustremaintrue

tothecorevalues.JamieDimonatJPMorganChase

madethispointforcefullywhenhesaid,“It’snotsufficient

tohaveonepersononyourteamwhoisatruthteller.

Everyoneontheteammustbecandidinsharingthe

entiretruth.Nomatterhowpainfulitis.”�

Aspirational culture: what does our preferred culture look like?

Throughtheprecedingdata,respondentswere

describingthecurrentcultureoftheirorganizations.

Wealsoaskedthemtochoosefromthesamelistof

possibilitiestheonesthatdescribetheaspirational

orpreferredfutureculture.�Inthetopfirms,the

alignmentbetweencurrentandaspirationalishigh;

thatis,thesamevaluesandbehaviorsarechosenin

eachcase.Ofthetop10valuesinthecurrentstate

fortheFocus6,75%alsoshowupintheaspirational

list.Theratiofortheindustryasawholeis56%.

Thefollowingchartshowsthesame“gapanalysis”

betweentheFocus6andtheindustry,butthistime

respondentsweregiventheseinstructions:Check

thevalues/behaviorsthatdescribeyourpreferred

culture,thatis,theonethatwouldbestallowthe

organizationtorealizeitsvisionofsuccess.


1�

Value/Behavior in aspirational

culture (i.e., preferred future)

Focus 6

(percent of

employees

voting for

this value)

Industry

Average

Difference

Clientsatisfaction �8% �9% 9%

Professional �1% ��% 9%

Profit/Financialsuccess ��% �5% 8%

Loyalty �6% 19% 7%

Positive �9% ��% 6%

Balance(home/work) �6% �0% 6%

Ethical/Integrity �8% ��% 5%

Respect ��% �0% �%

Trust/Sincerity �8% �5% �%

Candor/Honesty/Open �5% ��% 1%

Excellence/Continuousimprovement ��% ��% 1%

Long-termperspective/Vision ��% �5% -1%

Leadershipdevelopment/Mentoring �5% �6% -1%

Accountability/Responsibility �8% �0% -1%


1�

First,notethatthetopvote-getters—Clientsatisfaction,

Professional,Ethical/Integrity—arethesameforcurrent

andaspirationalvoting.However,“Excellence/Continuous

improvement”movedallthewayuptothesecondspot,

fromtheninthspot,inthisaspirationalpolling.Itseems

thatallinvestmentfirmshaveagoodappreciation

ofhowmuchongoingimprovementmatters.

Butalsonote:TheFocus6firmsarealreadyembracing

thispractice,whereastherestofthefirmsseemto

besaying,“Wemustbegintoadoptthispractice!”

Thisisabitliketheweekendwarriorwhosays,

“TomorrowIwillstartmyexerciseprogram!”

Culture summary: cohesion and alignment

Theresultsdiscussedsofarhighlightanddiscuss

specificvaluesandbehaviorsthatseemtoexplainthe

differencebetweengoodfirmsandgreatfirms.The

summarystatisticsthatweuseforculturearecalled

cohesionandalignment.Wedefinethemthus:

Cohesionreferstohowmanyemployeesarerallying

aroundthesamevalueorbehavior.Foragivenfirm,

wetakethetotalnumberofvotescastforthetop10

values/behaviorsandcalculatethatnumberofvotes

asapercentofthetotalvotescastforallchoices.The

higherthecohesion,thestrongertheculture.

Alignmentreferstothematchesinvalues/behaviors

foragivenfirmbetweenthecurrentandaspirational

results.Forexample,ifafirmhassixvalues/behaviors

thatareinboththecurrentandaspirationallists,we

wouldsaythealignmentis60%(sixoftenmatch).

Thehigherthealignment,thestrongertheculture.

Usingthesemeasures,wecancompare

theFocus6totheindustryaverage:

Culture strength Focus 6 Industry

average

Currentcohesion �5% �9%

Aspirationalcohesion ��% �9%

Alignmentbetween

currentand

aspirational

(percentthataresame)

75% 56%

Althoughthedifferencesarenotgreat,theresultsare

consistentwithourthesis.TheFocus6firmshavehigher

cohesionandalignmentthantheindustryatlarge.

Sludge: negative behaviors that slow down the system

Akeydescriptiveindicatorthatweusetodescribe

afirm’scultureis“sludge.”Wedefinesludgeasthe

negativebehaviorsthatreduceeffectivenessand

efficiencyinafirm.Sludgeislargelydrivenbyfear.

Sludgeresultsfromourstudyareasfollows:


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Firstnotethattheoveralldifferenceinsludgeisroughly

threepercentversustenpercent.TheFocus6firms

runmuchmoresmoothlybecauseofthisabsenceof

negativebehavior.Noticealsothatsludgeishigherin

everycategoryfortheindustryasawhole;innocase

didtheaveragefirmenjoylesssludgethantheFocus6.

Alsonotethatthetwosludgefactorsrepresentingthe

biggestdifferencebetweenFocus6andtheindustryare:

1. Slow-moving/Reactive

�. Short-termfocus

Indeed,manyofusmighthavepredictedthisoutcome.

Tosomedegreethecrisisfrightenedallofus,nomatter

howeven-temperedweare.Thenaturalreactiontofear

isconstriction—mentallyandphysically—whichleads

toslowmovementandshort-termfocus.RayDalio,CEO

ofBridgewater,iscarefultopointoutthedifference

KEY:Lowersludgeisbetter!

Sludge Factor Focus 6 Team

average

Industry

average

Difference

Slow-moving/Reactive �% 15% 1�%

Short-termfocus �% 1�% 10%

Bureaucracy �% 10% 8%

Defensivebehaviors �% 10% 6%

Territorial �% 9% 6%

Negative 1% 6% 6%

Entitlement �% 7% 5%

Blame �% 7% 5%

Politics 7% 11% �%

Gossip �% 6% �%

Manipulation 1% �% �%

Disrespect �% �% 1%

Overall Average 3% 10% 7%


16

betweenreactivethinkingandreflectivethinking.In

fact,hehascreatedaformulatodescribeit:pain+

reflection=progress.Inotherwords,ifapersoncan

experiencethepain(e.g.,fear)andthenreflectonit,

ratherthansimplyknee-jerkreacttoit,thatpersoncan

learnandgrow(i.e.,makeprogress).Apparently,the

Focus6havecreatedculturesinwhichtheyareless

likelytobereactiveandshort-termfocused.Inour

view,thiscouldbeexplainedbythe“Positive”factorwe

citedearlier,whichallowspeopletobemorerelaxed

duringthecrisis.Theoldsawis:“Thebeatingswill

continueuntilmoraleimproves.”Thenewerversion

ofthismightbe“Thebeatingswillcontinueuntil

resultsimprove.”Leaderswhotriedtopushtheirteams

throughthecrisislearnedthefutilityofthatstrategy.

Oftenafirm’ssludgefactorsare“addressed”inthechoices

ofaspirationalvalues.Forexample,ifafirmidentifies

“Bureaucracy”asanexistingvalue,itoftenwillchoose

“Accountability”intheaspirationallistasanantidoteto

thatcondition.(Thatis,firmsthatdevelopacultureof

accountabilitytendnottobebureaucratic.)Weseethisin

theindustrydataaswell.Giventhat“short-termfocus”is

oneofthetoptwosludgefactors,wemightpredictthat

“Long-termperspective/Vision”mayindeedbeoneofthe

industry’stopaspirationalvalues.Soitis,rankingeighth

highestofallaspirationalchoices.Manyinvestment

firmsareconsciouslyattemptingtooverridetheshort-

termfocusbyalteringtheirinvestmentprocesses.For

example,alargeequityquantshopjustchangedits

timehorizonfromone-monthintervalstosix-month

intervals.(TheCIOwasaskedbyastaffmember,“So,ifI

findastrategythatdeliversalphainthefirstmonth,then

givesitallbackinthenextfive,areweNOTinterested

inthatstrategy?”TheCIO’sresponse:“Correct.Weare

NOTinterested.”)ThisCIOnotonlyexpandedthetime

horizonbutmodeledcandidandtransparentbehavior

byclearlystatinghisposition.WehadcoachedthisCIO

tobeveryclearaboutwhichfactorswerenegotiable

andwhichweren’t.Thisputssharpedgesonaculture.

Success factors: the characteristics of successful asset management firms

Manystudieshavelookedatassetmanagementfirms

fromtheperspectiveofwhatfactorsseparatethetruly

successfulonesfromaveragefirms.Inoursurveywork,

weborrowfromthesestudiesandincludeadditional

factorsforconsideration.Employeestakingthesurvey

areaskedtorespondtoeachfactoronascaleofseven

(stronglyagree)toone(strongdisagree).Theresultsfor

theFocus6andtheindustryaregiveninthefollowing

table.(Note:Agree=7’sand6’s;disagree=�’sand1’s.)

The old saw is: “The beatings will continue

until morale improves.”


17

Foreveryoneofthetraditionalsuccessfactors,thedata

supportthehypothesisthattopfirmswilloutperformthe

averagefirmsintheseareas.Notethatwedidnotchoose

theFocus6basedonanyofthesetraditionalfactors.

Rather,thesefactorsanswerthemorefundamental

question:What drives the success of these top firms?

Ininformationbusinesses,employeesarethe

onlyrealassets.Ourresearchsupportsthesimple

butprofoundconceptthatwhatisgoodforthe

employeeisgoodfortheclient.Thesesuccess

factorsallowfirmstogetthroughthedifficulttimes

andprosper,ratherthanliveinfearandwither.

Take,forexample,itemDintheprecedingtable—“We

haveanownershipmentality.”MichaelKellyatForest

InvestmentAssociatessaidseniormanagementhas

workedconsistentlytodriveownershipdeepand

widethroughthecompany,andithaspaidoff—with

�6of�8employeescurrentlyowningequityin

thefirm.HerearethescoresforForestrelativeto

theindustryandtheotherFocus6companies:

Success factor statement Focus 6

Agree

Focus 6

Disagree

Industry

Agree

Industry

Disagree

Asanorganization,wehavethe

abilitytoattracttoptalent.

A. 86% �% 61% 5%

Wearefreeofsilosinourorganization.B. �0% 11% �6% ��%

Wehavestrongtalentmanagement,

whichincludescareerpathing

andsuccessionplanning.

C. �9% 7% �8% �0%

Wehaveanownershipmentality;

ouremployeesthinklike

ownersofthebusiness.

D. 6�% �% ��% 16%

Wearegoodatexecutingplans.E. 78% �% �0% 6%

Ourseniorteamcommunicates

well(clearandtransparent).

F. 65% 6% �1% 1�%

Success factor Entity Agree Disagree

Wehaveanownershipmentality;

ouremployeesthinklike

ownersofthebusiness

Forest 8�% 0%

Industry ��% 16%

Focus6 6�% �%


18

Noticethatinthe“Disagree”column,noonesurveyed

resistedthestatementofownershipmentality.For

thisreason,Kellysays,“We’reallpullingtogether.”

Anotherimportantsuccessfactor,mentioned

earlier,isCommunication.Inthecaseof

RetirementAdvisorsofAmerica(RAA),another

Focus6firm,BartRobersontoldusthat:

“...the senior team meets monthly to review annual

goals. Each member of the team is required to talk

about the top six things they want to accomplish

and to set SMART goals for each. Then they

report on whether they have completed a goal

or not. There is no middle ground: yes or no!”

Basedonthislevelofattention,thefirmhasvery

highscoresforitemFintheprecedingtable:

RAA team factors Average

score

High

score

Low

score

Percent of agree

(i.e., scores of 6 or 7)

Iamcandidandopen

withmyteammates.

6.75 7 6 100%

Iknowmyroleontheteam

andwhatisexpectedofme.

6.75 7 6 100%

Ihaveclearperformancegoalsthat

measuremysuccessonthisteam.

6.50 7 6 100%

Myteamleaderencouragesmy

growthanddevelopment.

6.50 7 6 100%

Iknowwhatourteamistrying

toachieve.Thepurpose

anddirectionareclear.

6.50 7 5 75%

Success factor Entity Agree Disagree

Ourseniorteamcommunicates

well(clearandtransparent).

RAA 67% �%

Industry �1% 1�%

Focus6 65% 6%

Roberson’sscoresfromhisfourseniorteammembersreflectthelevelofcandorandclarityaboutgoalsinthe

organization(7=stronglyagree,1=stronglydisagree).


19

Strong culture: what mindsets and attitudes does it support?Anotherimportantaspectofcultureisidentifyingwhat

mindsetsandattitudestheculturereinforces.Allofthe

characteristicsinthefollowingtablehavestrengthsand

weaknesses.(Forexample,initiativeandrisktakingcan

beseenasproactiveandentrepreneurial,eventhough

theycanleadtorecklessnessandcarelessness.)Ingeneral,

though,theFocus6werehigherinallofthesecategories,

suggestingthattheleadersofthefirmsareleveraging

themconstructively.Employeeswereasked,“Whichofthe

followingdoesyourculturesupport?”Theresponsesare:

Temperament (attitude/behaviors)

“our culture supports …”

Focus 6

agree

Focus 6

disagree

Industry

agree

Industry

disagree

1....fullengagementand

employeedevelopment. 60% �% �1% 8%

�....initiativeandrisktaking. �5% 6% �6% 9%

�....competitionandhighperformance. 68% �% �8% 6%

�....efficiencyandloyalty. 8�% 1% 5�% �%

5....clarity,order,andgoodcommunication. 65% �% �8% 9%

6....effectivedecisionmaking 7�% �% ��% 8%

ThefourhighestscoresfortheFocus6are:

Efficiencyandloyalty.

Effectivedecisionmaking.

Competitionandhighperformance.

Clarity,order,andgoodcommunication.

Indeed,inourinterviewswithhundredsofinvestment

professionals,thesefourfactorswereconsistentthemes.

EfficiencyandloyaltyremainedhighattheFocus6.

Despitetheuncertaintyinfinancialmarkets,leadersat

theFocus6usedtheirskillsat“clarity,order,andgood

•

•

•

•

communication”tokeeptheteamengagedandfocused

onwhatcouldbecontrolledratherthanallthethings

thatcouldnot.Bothofthesefactorscontributedtoa

highscoreforeffectivedecisionmaking.Webelieve

thatassetmanagementfirmsareinthedecision-

makingbusiness,soleadersmustmanageinawaythat

contributestothiscorecompetency.Specifically,leaders

helpedtheirteamsfocusontheprocess(whichisunder

theircontrol)ratherthantheoutcome(whichisnot).

Evidenceforthisfocusonwhatiscontrollableisseenin

theprecedingSuccessFactorschart,whereFocus6firms

scored78%versus�0%fortheindustryon“Execution.”


�0

Additionally,theseleadersclearlycommunicatedwith

employeesaboutthefirm’sfinancialposition,results,

andoutlook.Employeesbetterunderstoodthecauses

andeffectsofvariousdecisionsandlearnedabout

thecontrollableoutcomes.Thisleveloftransparency

helpsreducefearandcreatesbetterteamcamaraderie,

asitpositionsthethreatsoutsidethefirm.

Leadership teams: key success factorsThefactorsdiscussedinthe“Culture”sectioncanbe

thoughtofasthemacropictureofthefirm.Wenow

turntothemicropicture:Whatishappeningwith

theseniorleadershipteam?Ourexperiencetellsus

thatgoodleadershipandstrongculturegohand

inhand.Wewouldbeverysurprisedtoseeafirm

thathadstrongcultureresultscombinedwithweak

leadership,orthereverse.Infact,thedatasupportour

experience.AlloftheFocus6firmshadstrongculture

resultsandstrongseniorleadershipteamresults.�

Inourleadershipteamscorecard(e.g.,theFocus

15,orF15),weaskedthedirectreportsofthefirm

leadertorespondto15well-researchedfactors

thatdefinehigh-performingteams.Theresultsfor

boththeFocus65andtheindustryaregiveninthis

section.Thenumberofdirectswhofilledoutthe

surveyrangedfrom�to1�.Thescaleusedwas

again7(stronglyagree)to1(stronglydisagree).

“...leaders clearly communicated with

employees about the firm’s financial

position, results, and outlook. Employees

better understood the causes and effects

of various decisions and learned about

the controllable outcomes. This level of

transparency helps reduce fear and creates

better team camaraderie, as it positions the

threats outside the firm”.


�1

FactorFocus 6

skill average

Industry

averageDifference

1.Iknowwhatourteamistryingtoachieve.

Thepurposeanddirectionareclear.

5.85 6.1� -0.27

�.Iknowmyroleontheteamand

whatisexpectedofme.

6.18 6.18 0.00

�.Ihavetheresourcestodomyworkwell. 5.8� 5.5� 0.�1

�.Wehavetherightteammembers

toaccomplishourgoals.

6.15 5.�1 0.75

5.Asateam,wevalueandappreciateoneanother. 6.08 5.55 0.53

6.Thereisahighleveloftrust

amongteammembers.

5.98 5.�0 0.67

7.Iamcandidandopenwithmyteammates. 6.�9 5.87 0.��

8.Ifeelfairlycompensatedformycontributions. 5.99 5.18 0.81

9.Ihaveclearperformancegoalsthat


5.�0 5.18 0.1�

10.Ireceiveusefulfeedbackfrommyleader. 5.16 5.�6 -0.10

11.Ourteamopenlydebatesissues. 5.79 5.�1 0.57

1�.Iamwellinformedaboutwhat’sgoingonatwork. 5.78 5.�5 0.54

1�.Myworkallowsmetousemytalentsandabilities. 6.�1 6.01 0.�9

1�.Myteamleaderencouragesmy


5.6� 5.�9 0.1�

15.Ifeelthatmyworkisimportantto

reachingourfirm’sgoals.

6.5� 6.�� 0.�1


��

First,weshouldpointoutthatwedidnotlookatthe

F15resultswhenpickingtheFocus6;theselectionwas

basedsolelyontheculturefactorsmentionedearlier

andintheappendix.Interestingly,ononly�of15

factorsdidtheindustryasawholescorehigherthan

theFocus6(Question#1onpurposeanddirection

andQuestion10onfeedbackfromtheleader).The

other1�factorsindicatesuperiorteamworkonthe

partofFocus6leadersandtheirdirectreports.

Alargedifferential—Trustat0.67—supportsother

researchthattheFCGhasperformedandwrittenabout.6

Wehavelongmaintainedthattrustisthefuelthat

driveshighperformingteams.Otherimportantfactors,

suchascandor,cannotthrivewhentrustislacking.

Thehighest-rankingdifferentialappearedonfair

compensation for my contributions.Atthemostsuccessful

firms,leaderstakethetimeandefforttodesignand

implementcompensationsystemsthatareseenasfair

andtransparent.ThisdoesnotmeanthattheFocus6

arethehighest-payingfirms.Infact,theyacknowledge

thattheydonotaimtopaytopdollar.Creatingacomp

systemthatprovidesemployeeswithafeelingthatthey

arefairlycompensatedisamixtureofartandscience.

TheFocus6havefoundformulasthatworkforthem.7

Finally,athirdfactorthatseparatedthe“bestfromthe

rest”ishaving the right team members.Thereisnoquicker

waytocreatedramaandnegativityinateamthanhaving

thewrongplayersaroundthetable.Admittedly,thisis

asubjectivecall,butitisneverthelessaveryimportant

one.(Indeed,thisfactorisratedmostimportantofall

factorsbyboththeFocus6andindustrygroups.Ina

talentindustry,selectingtherighttalentforyourteam

isthetoppriority.)Inshort,then,theassetmanagement

firmsagreeinaggregatethathavingtherightteam

membersisthesinglemostimportantfactorinteam

effectiveness;it’sjustthattheFocus6havedonea

significantlybetterjobofassemblingtherightplayers.

(Weonceaskedaroomfullof50CIOs—equippedwith

devicesthatallowedanonymouspolling—iftheyhadat

leastoneplayerontheirseniorteamwhomtheywish

wouldquit.Inresponse,50%ofthemanswered,“Yes!”)

Thetopfirmsrecognizethepainanddifficultyinvolved

inmakingthesecallsandarewillingtodowhateverit

takestoassembletherightteam.SeveralFocus6leaders

acknowledgedtheindustrysloganof“Hireslow,firefast.”

Emotional intelligence: Focus 6 show an absence of blind spots

AnothercharacteristicoftheFocus6leaderswasa

higherlevelofemotionalintelligence.8Oneaspectof

ourF15teamscorecardisa“blindspotanalysis.”Weask

thedirectreportstorespondtothe15factors,butwe

assigntheleaderaslightlydifferenttask.Theleaderis

supposedtoconsidereachfactorandthenanticipate

howtheteamwillrespond.Forexample,onthequestion

aboutcompensation(“Ifeelfairlycompensatedformy

contributions.”),theleaderissupposedtoaskherself,

“Hmmm.Isthattrueofmyteam?Willtheygivethisa

highmark(e.g.,a7,“stronglyagree”)oralowmark(1,

or“stronglydisagree”)?”Theleaderentersaguessand

thenwecomparethatguesstotheteam’sactualaverage

score.Iftheleader’sguessismorethanapointaway

fromtheaverage,wenoteitassignificant.Herearethe

resultsfortheFocus6versustheindustryaverage:


��

Blindspots

(lower is

better)

Leader too

optimistic

Leader too

pessimistic

Focus6

leaders

7% 7%

Industry

leaders

15% 11%

TheFocus6leadersappearmoreattunedtothe

realityoftheirteams.(OneoftheFocus6leaders

hadaperfectscore,withnooverlyoptimisticor

pessimisticratings.)FromourperspectiveatFCG,

wehavelongarguedthatself-awareness—a

componentofemotionalintelligence—isanimportant

competencyofgreatleadership.Itisencouraging

toseethatassumptionsupportedbythisdata.

Autopsy: the death of a firmOnasoberingnote,oneofthefirmsthatagreedto

takepartinthesurveysdidnotsurvivethecrisis.

Aftertakingthesurveysinthefirsthalfof�010,this

firmcloseditsdoorsinthesecondhalf.Althoughwe

sympathizewiththeemployeesandtheirfamilies,

thisfirm’ssurveyresultsdoprovidepowerful

evidencetosupportthefindingsfromtheFocus6.

Thesummaryfiguresforthefailedfirm(Diver),the

industry(Survivors),andtheFocus6(Thrivers)are:

Summary statistic Diver Survivors Thrivers

Culturecohesion:existing �8% �9% �5%

Culturecohesion:aspirational ��% �9% ��%

Alignmentofcurrentversusaspirationalvalues �0% 56% 75%

Sludgefactors �1% 10% �%

Loyaltyfactor(percentravingfans) 9% �5% 6�%

Successfactor(percenttopdecileversuscompetitors) 0% �8% 65%

Successfactor(percentbottomdecileversuscompetitors) ��% 0% 0%

Effectivedecisionmaking(percentagree/stronglyagree) ��% ��% 7�%


��

“The existing culture

is very tough to

define because it

would seem that

everyone has their

own idea of what

Diver's culture is

and should be.”

Ineveryoneofthesekeysuccessfactors,theDiver

indicatoriswellbelowthoseoftheindustryaverage

andtheFocus6.Theexceptionis“Culturecohesion:

Aspirational,”whichmeasuresthehopesanddreamsof

theemployees;thatis,whatwouldourorganizationlook

likeinitsidealstate?Forthisstatistic,theDiverisinline

withtheindustryandFocus6firms.Thismakessense

because,regardlessofcurrentcircumstances,employees

mayhaveasimilarviewofapreferredfuture.(Whether

theycanattainitisawhollydifferentquestion!)Notice,

though,thatthealignment—numberofmatching

valuesbetweencurrentandaspirationalstate—isonly

�0%forDiver,muchlowerthantheindustryorFocus

6.ThislowernumberforDiverindicatesthegreater

distanceitmusttravelfrom“current”to“preferred.”In

thecaseofDiver,itfailedaltogetheralongthatjourney.

CommentsfromemployeesatDiversupportour

generalthesisthatstrongcultureisimportant

toinvestmentsuccess.Hereareactualexcerpts

fromthecommentssectionoftheirreport:

The existing culture is very tough to define because

it would seem that everyone has their own idea

of what Diver's culture is and should be.

The culture is not strong at Diver. People say

that the culture is great, things such as open-

minded, strong, compassionate, hard-working,

team environment. That's not how it really is.

Information is being held and there is no team.

I feel as if I'm on a sinking ship and I can't do anything

about it because our culture is not equal and open.

Thewarninglightswereflashingevenmore

franticallyintheSeniorTeamScorecard:

ToputtheDivernumbersshowninthistablein

perspective,hereiswheretheywouldrankrelativetothe

industry(industryaveragesareslightlydifferentbecause

weaddedseveralcompaniessincethetimeofthesurvey):


�5

Team factors Industry

average

Diver

average

Diver percent rank

relative to industry

Iknowwhatourteamistryingtoachieve.

Thepurposeanddirectionareclear.

6.08 6.�5 69%

Ireceiveusefulfeedbackfrommyleader. 5.�9 5.�5 ��%

Ifeelthatmyworkisimportantto

reachingourfirm’sgoals.

6.�6 6.�5 �5%

Iamwellinformedaboutwhat’sgoingonatwork. 5.�7 5.00 �1%

Ihavetheresourcestodomyworkwell. 5.56 5.00 �7%

Myworkallowsmetousemytalentsandabilities. 6.06 5.50 19%

Ihaveclearperformancegoalsthat


5.1� �.00 1�%

Ifeelfairlycompensatedformycontributions. 5.�7 �.75 10%

Iamcandidandopenwithmyteammates. 5.91 5.�5 8%

Myteamleaderencouragesmy


5.56 �.75 8%

Thereisahighleveloftrustamongteammembers. 5.�7 �.00 8%

Iknowmyroleontheteamandwhatisexpectedofme. 6.�0 5.�5 6%

Asateam,wevalueandappreciateoneanother. 5.59 �.�5 �%

Ourteamopenlydebatesissues. 5.�6 �.�5 �%

Wehavetherightteammembers

toaccomplishourgoals.

5.�6 �.00 �%

How the Diver Team’s factors deviate from the industry average


�6

Theredshadingindicatesallthefactorsthatfallbelow

theindustryaverageforDiver:allbuttwoofthem.

Ironically,throughouttheperiodimmediatelypreceding

theirdemise,theleadershipteamatDiverranked

highlyintheirbeliefthattheyknewtheirpurposeand

mission,andthattheirleaderwasgivingthemuseful

feedback.IfwehadtopinpointarootcauseforDiver’s

failure,wewouldchoosetheleadershipteam’sfailure

toassembletherightteammembers.Thesenior

teamscoredthisa“�,”whichisthelowestscoreinour

database.Pointedly,theleadercorrectlyanticipated

thislowscoreinhisportionofthe“Blindspot”analysis

(i.e.,hecorrectlyguessedthattheteamfelttheyhad

thewrongplayers).Thisleadstotheobviousquestion:

Iftheentireseniorteamknewthatthewrongpeople

wereonthebus,whywasn’tanyactiontaken!?In

ourview,thelessonsfromthedemiseofDiverare

importantenoughtomeritaseparatefollow-uppaper.

So,we’llleavethatdiscussionforanothertime.

Lessons learned: what are the takeaways?BystudyingthesimilaritiesoftheFocus6

firms,wecanhopetolearnbestpracticesfor

managingassetmanagementfirms.Indeed,

theselessonsemergedfromthedata.

1. Pack your parachute before it’s time to jump!

OneclearlessonfrominterviewswiththeFocus

6firmsisthattheyhaveworkedsteadilyto

developstrongculturesovertheyearssothatthey

wouldbepreparedforadversitywhenitstruck.

AJO,whichiscelebratingits�5-yearanniversary,

wasfeaturedinourbook,Investment Leadership

(�00�),wherewenotedthatforAJOthesludge

factorwaslowandtheculturewasstrong:high

levelsofbothcohesionandalignment.Similarly,

theotherFocus6firmshavedevelopedstrong

cultureswiththeawarenessthatcultureallows

firmstobetterweathertoughtimes.Hereisthe

datafrommorethan500investmentprofessionals

whowereasked:Whatarethebenefitsofstrong

culture:

Top benefits of a strong culture are...(3 choices)

11%

1 � � � 5 6 7 8

Hireforfitmuchmoreeffectively.

Orientnewemployeesquicklyintotheculture.

Promoteandcompensatebasedonvalues.

Mentorandcoachmoreeffectively.

Betterweatherthetouchtimes.

Improvedecisionmaking.

Createastrongerbrandandbetterstoryfor

consultantsandotherexternalaudiences.

Leadchangemoreeffectively.

1.

�.

�.

�.

5.

6.

7.

8.

6%

10%

1�% 1�%16%

1�%

16%


�7

Noticethat#5,“betterweatherthetoughtimes”

wasoneofthetopchoicesfordefendingstrong

culture.OurFocus6groupsuggeststhatstrong

cultureisgoodpreventativemedicineforthe

inevitabledownturnsthatassetmanagers

willface.Butculturetakesalongtimeto

create,andforourattentiondeficit-ridden

society,itishardforleaderstostickwithit.

Unconventional Wisdom: Tending to the “soft”

stuff is actually the harder job for leaders. Michael

Mauboussin writes compellingly about the

importance of process over outcomes, but many

asset management professionals are still staring

at the scoreboard and not at the field of play (i.e.,

the process).9 Develop a culture that promotes

and rewards the right process so that in difficult

stretches the right behaviors will have become second

nature—and players will keep their eyes on the ball.

2. Trust and respect are the fuel of high-performing

teams. OurdataclearlyshowthattheFocus6

leadershipteamshadhigherlevelsoftrustthan

theindustry,byasignificantamount.Leadersin

theassetmanagementbusinessoftenmakethe

mistakeofassumingthatiftheyhavedeveloped

strongtrustwiththeseniorteam—thatis,leader

toallhis/herdirectreports—thatthetrust

amongtheteammembersisalsostrong.Leaders

mustbeawareoftheseniorteamdynamics,

andtheymustknowtherighttrustleversto

pull.(SeeRobertHurley,“TheDecisiontoTrust,”

Harvard Business Review,September�006.)

Unconventional Wisdom: Skepticism may be

a valuable attitude for investment professionals

in their role as investors, but it is deadly in

their role as trust builders. Rather, they must

lead with trust and positive expectations of

their team, not with suspicion and doubt.

3. Having the right team members in the right

roles is critical. StraightfromJimCollins’s

Good to Great,theThrivers(i.e.,theFocus6)

allfeltthattheyhadtherightmembersof

theseniorteam.Oneofthequickestwaysto

destroyhighmoraleonacompetitiveteamis

to“allow”weakplayerstoremainonit.Forthis

reason,someofthestrongerculturesinthe

assetmanagementworldhaveadoptedfairly

stringentstandardsforemployeeswhodon’t

fit.RayDalio,BridgewaterCEO,saysofthese

employees,“Theyhavedevastatingimpacton

theorganization.Whenit’sclearthatpeople

aren’tworkingoutinajob,getthemoutof

itASAP.”MichelleSeitz,HeadofEquitiesat

WilliamBlair,hasmadesimilarcommentsabout

protectingthestrongandsuccessfulcultureshe

hasbuilt.TheFocus6firmsratedthisfactor—the

rightteammates—assignificantlyhigherin

bothskillandimportancecomparedtothe

industry.Inshort,thesesixfirmsmadeaclear

statementthathavingtherightteammembers

ishugelyimportanttosuccessandweathering

toughtimes.Theytendtofollowthetough

guidingprincipleof“Hire slow and fire fast.”

Unconventional Wisdom: Many firms design

their strategies and organization charts, then

plug people into the boxes. Bud Grant, Hall of

Fame Minnesota Vikings coach, had it right; he

said, “When I draw up my play book, I always go

from the players to the plays.” Jane Marcus at

KornFerry has adopted this strategy in her recruiting

of senior talent: “I’m not looking to fill boxes on

a chart. I’m looking at the whole system.”

4. The best firms “get the money thing” right, to

paraphrase Buffett. Compensationisoneof

thethorniestissuesintheindustry.Gettingthe


�8

rightformulasothatpeoplefeelfairlycompensated

ischallenging.Toastatisticallysignificantlevel,

employeesattheFocus6firmsfeltmorefairly

compensatedthantheindustryonaverage.Thesame

wastruefortheFocus6inthecaseofownership

mentality.Toamuchgreaterextent,theemployees

oftheFocus6feltthattheywereownersofthefirm

andbehavedthatway.Inourexperience,thebest

practicefordesigningcompensationsystemsinvolves

seniorleaderscollaboratingdirectlywiththestaffto

discussandagreeonwhatconstitutesafairreward

system.Assimpleasthissounds,fewfirmsdoitthis

way.Rather,theyassignasubcommitteetomeet

covertlyandcrackthecompensationcode.Invariably,

thissubcommitteereturnswithaplanthatdoes

notresonatewiththeprofessionalsinquestion.The

resultisdissatisfactionandoftenlossofkeytalent.

Unconventional Wisdom:Reward systems

must be seen as fair. Rather than using “experts”

to design a comp system, use the “wisdom of

crowds.” Let the relevant team design its own

reward system, within the parameters given.

5. Candor is essential to high-quality decision

making. Bothattheseniorteamlevelandinthe

broadercultureofthefirm,theFocus6showedmuch

higherlevelsofcandor,openness,andhonesty.We

callthegapbetweenwhatisthoughtandwhatis

saidthe“CandorGap.”Oursurveymeasuredthisgap

forassetmanagementfirmsandfoundthatona7-

pointscale(for“perfectcandor”),theaveragegap

fortheindustryis1.6�.Seniorinvestmentteamsin

generalmiss“totalcandor”bythisamount,whereas

theFocus6teamsclosethegapconsiderably,to

1.10.Interestingly,forboththeindustryandthe

Focus6,individualsfeelthattheypersonallyaremore

candidthantheteamis(LakeWobegoneeffect…).

Personal

candor

score

Team

candor

score

Industry 5.9� 5.�9

Focus6 6.�1 5.90

Theinvestmentbusinessisarguablythe

quintessentialknowledgeindustry,sofirmsshould

pushhardtogetalltherelevantinformationon

thetable.DalioatBridgewatermakesagoodpoint

whenhesays,“Yourgoalistohavepeoplediscuss

ordebateimportantissuesinanopen-mindedway

untilthebestanswersaredetermined.Thisprocess

shouldmaximizelearningandmutualunderstanding.

Thrashitouttogetthebestanswers.”10

Unconventional Wisdom: Peopleassumethat

candorandcongenialitycannotliveinthesame

room.Youcaneitherbebrutallyhonestorpolitely

discreet(read:withholding).Nottrue.Thebest

firmshavelearnedto“tellthetruthwithlove,”

whichissoundadvicestraightfromtheBible!

6. Appreciation is alive and well at the Focus 6

firms. Theinvestmentindustryisfilledwithtype-

Apersonalities:drivenandfutureoriented.The

phrase,“Whathaveyoudoneformelately?,”perfectly

describestheattitudesinthisindustry.Andmost

investorscantellyouwhatthey’vedonelately,by

lookingatminute-to-minuteportfolioreturns.You

canmeasuretheamountoftimeduringwhich

investmentprofessionalsrelaxandappreciatetheir

accomplishmentsinnanoseconds.Interesting,

then,thattheFocus6levelsofappreciationwere

higherthantheindustryaverages.Theoppositeof

anappreciativeattitudeisoneofentitlement.In


�9

theformer,wearelargelyfreeofexpectations

andcanenjoywhatcomesourway.Inthe

entitledmindset,wehavehighexpectations

forwhattheworld/boss/spouseowesus.

Andwearemiffedifwedon’tgetit!

Our data show that the Focus 6 firms had

virtually no entitlement mentality anywhere in

their organizations (less than 1% in the culture

survey). The average investment firm had 7% of

votes cast for entitlement. When asked about

this phenomenon of “What have you done for me

lately?”, many investment professionals confess

a high level of fear associated with relaxing and

appreciating their success. Why? Because they

might get used to it and lose their edge! They might

lose their desire for continuous improvement! So,

they keep pushing and pushing. In our experience,

one can learn to be appreciative and be high

performing as well. In fact, more so. Note that one

of the values Focus 6 firms embrace is “Easy going/

Good natured.” This flies in the face of the argument

that you must grimly push ahead to be successful.

Even Dalio at Bridgewater, who sometimes gets cast

as a taskmaster, says, “Clarify and draw attention

to people’s strengths and what’s being done well.”11

To paraphrase Fred Martin at DGI, a Focus 6 firm:

“I deliberately look for something to appreciate

in each of my team members. In one, I might

find a great sense of humor. In another, I admire

the way he places his family first. In still another,

I respect that he pushes back whenever he

disagrees. I can choose to focus on the irritating

qualities or on this positive stuff. My call.”

Unconventional Wisdom: Driving

forexcellenceisnotincompatiblewith

appreciationofoneselfandothers.

7. Focus 6 firms are driven to continually

improve and reach for excellence.

Reader:Okay, you just said that driving and

pushing are NOT what distinguishes the top

firms. So, I’m confused, what are you saying?

Indeed,thisisaparadox.AlthoughtheFocus6

arebetteratappreciatingthemselves,theyalso

embracemorefullythevalueof“Excellence/

Continuousimprovement.”Duringtheinterviews,

weprobedforthenuancesofthisparadoxand

foundthatthedifferenceliesintheattitude

towardcontinuousimprovement.Inshort,

theFocus6enjoytryingtogetitbetter.They

didnotcharacterizetheendlesspushfor

improvementasagrind,butratherasafun

challenge.Perhapstheyenjoyitbecausetheydo

experiencemoreappreciationastheystrivefor

greaterexcellence.Inanycase,thedatareveal

thattheFocus6areindeedcutfromthattype-

Acloth:theongoingquestforimprovement.

Unconventional Wisdom: Ratherthan

tryingtoshoreupweaknesses,thebestfirms

identifyandleveragetalent.Continually

improvinginyour“sweetspot”feelsfunand

satisfying.It’sarenewablesourceofenergy.

8. Focus 6 firms demonstrate a higher level

of self-awareness. DanGoleman,authorof

Emotional Intelligence,saysthatthissortof

awareness—aboutselfandothers—isthree

timesmoreimportanttosuccessthantechnical

knowledgeorexperience.Theleadersofthe

Focus6showedagreateremotionalintelligence

intheportionofoursurveycalled“Blindspot

Analysis.”Theywerebetterabletopredicthow

theirteamswouldrespondtothe15factors

onintheTeamScorecard.Inshort,theywere


�0

betterableto“read”theirteammembers.A

higherscoreinthefollowingtablemeanslower

emotionalintelligence(moremissedguesses

onthepartoftheleaderabouthis/herteam):

Blindspot

analysis

Leader too

optimistic

Leader too

pessimistic

Focus6

leaders

7% 7%

Industry

leaders

15% 11%

Unconventional Wisdom: Manyinvestment

professionalsstillbelievethatthebestleadersin

theirindustrymusthavetechnicalexpertisein

investing.OurresearchagreeswithGolemanthat

thebestinvestmentleadershavehighemotional

intelligencefirst,andtechnicalexpertisesecond.

9. Focus 6 firms recognize the power of

aligning people with natural abilities.

PeterDrucker,arguablythemostimpressive

managementguruofalltime,saidthisabout

managers’levelsofself-awareness:

“Eventoday,remarkablyfewAmericansare

preparedtoselectjobsforthemselves.Whenyou

ask,‘Doyouknowwhatyouaregoodat?Doyou

knowyourlimitations?’,theylookatyouwitha

blankstare.Ortheyoftenrespondintermsof

subjectknowledge,whichisthewronganswer.”

Someofthemostimpressiveleadersweknowin

theindustryhavebuilttheirculturesaroundthis

principleof“genius”:namely,findoutaperson’s

sweetspotandthenalignherorhimwithit.For

theteamfactor,“Myworkallowsmetousemy

talentsandabilities”,theFocus6significantly

outscoredtheindustry:6.��versus6.0�.Also,

therewereconsistentlyfewerincidentsof

misalignmentswiththeFocus6.Thelowestscore

(ona7-pointscale,where7=stronglyagree)

foranyoftheFocus6teammembersonthis

factorwas5,whichis“slightlyagree.”Noonewas

neutralorindisagreementwiththestatement.

Unconventional Wisdom: Manyinvestmentleaders

stillbelievethatitisaluxurytospendmorethanhalfof

theirdaysdoingwhattheylove,andthatitisunrealistic

toexpectanythingdifferent.Inourinterviewswiththe

Focus6leaders,theydeclaredthatinagivenweekof

worktheyaveragemorethan80%oftheirtimeintheir

“sweetspot.”Theydonotfeelguiltyaboutit;theyknow

itisthebeststrategyforthemselvesandtheirfirm.

10. The cultures of the Focus 6 support effective

decision making. Inourview,thismaywell

bethe“bottomline”ofallthisanalysis.Namely,

thesetopfirmshavedonetherightthingsto

supporteffectivedecisionmaking.Ourculture

surveyasks,“Doesyourculturesupporteffective

decisionmaking?”Theresultsareclear:

Temperament (attitude/behaviors)

“Our culture supports...”

Focus 6

agree

Focus 6

disagree

Industry

agree

Industry

disagree

Culturesupportseffective

decisionmaking.

7�% 1% ��% 8%


�1

Intheearliercharton“BenefitsofaStrongCulture,”

thetopratedbenefitwas“improveddecisionmaking.”

Investmentprofessionalsinallcornersoftheworld

seethelinkbetweencultureanddecisionmaking,

andyet,intheaveragefirmfromourresearch,only

��%oftheemployeesthinkthattheculturedoes

supporteffectivedecisionmaking.Inthedebriefing

sessionswithinvestmentleaders,thiswasapointthat

wehithard:figureoutwhatisinhibitingeffective

decisionmakingandfixit.Whenaskedbythese

sameleaders,“Howdowedothat?”,ourresponsewas

clearlysupportedbythedata:Reducetheamountof

sludgeinyoursystem.Thesetwofactors—sludgeand

effectivedecisions—wereclearlycorrelated.Tothe

degreethatyourorganizationpromotesandtolerates

drama,itwillnegativelyaffectgooddecisionmaking.

Eliminatingsludgefromthesystemissimilarto

eliminatingfatfromthebody.Youhavetocommittothe

process:“Iwanttogethealthy.”Thenyoumustdesign

aprogramofhealthyeatingandexerciseandstickto

it.Whenfirmsarewillingtodothis,we’veseensludge

factorsdecreasebymorethan50%insixmonths’time.

Leadersmustbewillingtomaketoughchoices,however,

iftheywanttoseetheseresults.Often,thebiggest

waytoreducesludgeistoidentifythemisfits(people

whodon’tfitwithyourculture;wecallthem“RedXs,”

Netflixcallsthem“BrilliantJerks”)andmanagethem

out.Thisistheclearestwaytosendasignal:weare

seriousaboutbuildingandprotectingastrongculture.

Unconventional wisdom:Investmentleaders

mistakenlythinkthattheycanbuildastrongculture

withouteffort.Likephysicalfitness,buildingastrong

culturerequirescommitmentandvigilance.

Conclusion

TheGlobalFinancialCrisisprovidedtheultimatestresstest

forassetmanagementfirms.Somethrived,somesurvived,

somesank.Thedatafromnearly60firmssuggeststhat

strongleadershipandstrongculturewereinstrumentalin

determiningtheirsuccessorfailure.Inthispaper,we’ve

reviewedthedatacarefullytoextractthelessons.Weconclude

thatinvestmentleadersignoreattheirperilthebasictruththat

investmentsisatalentindustry—andtalentmeanspeople.

Investmentleadersfacetheelegantparadoxofmanaging

talentedprofessionalswhodon’treallywantanyonetomanage

theminthefirstplace!Despitethischallenge,sixfirms(the

Focus6)foundexemplarywaysofnotonlysurvivingbutalso

thrivingduringthecrisis.Wesalutetheirskillandsuccess.


��

Appendix A: Methodology for writing this white paper

Theideaforthispapercamefromtherealization

thatourlargedatabaseofassetmanagementculture

statisticshadbecomeobsoleteduringthefinancialcrisis.

So,intheautumnof�009,wedecidedthat�010would

betheyearinwhichwerebuiltthedatabasewithfresh,

post-crashdata.Wecontactedhundredsoffirmsinthe

industry,especiallyfirmslikeAMG,AMF,OldMutual,

andProgress,whichrunmulti-boutiquestrategies,and

askediftheywouldliketotakeadvantageofaone-

time-onlyoffertoreceiveacultureandseniorleadership

teamreportfromFCG.Happily,nearly60firmsjumped

in,whichourstatisticalexpertstolduswas“plenty”to

assurestatisticalsignificance.(Interestingly,inthearea

ofelectionforecasting,welearnedthatasamplesize

ofaboutathousandrandomlyselectedindividualsis

significantandpermitsaccuratepredictionofresults,

regardlessofwhetherthepopulationis10millionor1

billion.Soitiswithassetmanagementfirms:60gives

usaprettygoodlookatthemakeupoftheindustry.)

Ourstatisticalexperts,allworkingseparately,are:

DougHubbard,authorofHow to Measure

Anythingandconsultanttomanyfirms

onstatisticalapplications.Chicago.

BrindhaGunasingham,PresidentofFitzBiz

InvestmentAnalysis&Strategy;GAICD,CFA,MA

Cantab,MSc(Econ)Lon,BAHonsCantab.Sydney.

MikeFarrar,statisticalconsultant.Chicago.

Theseexpertshelpedusinthedesignandinterpretation

ofthesurveys.Muchoftheactualcontentofthe

surveys—questionsandfactors—waspiecedtogether

fromacademicresearchandindustrystudies.We

hadnoillusionsaboutdiscoveringoriginaltruths;

•

•

•

rather,weborrowedfromthebest.Forexample,each

ofthe15teamworkfactorsinourF15Scorecardhas

solidresearchbehindittoshowthatitdrivesteam

performanceandoutcomes.Reassuringly,inoursurveys,

the“importance”rating(inwhichrespondentsrate

theimportanceofeachofthe15factors)provedthat

all15ofthefactorswereindeedseenasimportant.

Theexpertsalsohelpedusindesigninginterviewsthat

wouldbesttesttheresultsofthesurveys.Welearneda

greatdealfromtheseexpertsandaregratefulfortheir

help.Anothergreatsourceofhelpinthestatisticsarea

wasMichaelStarbird,professorattheUniversityofTexas

inAustin.HisDVDseries,called“MeaningfromData:A

GuidetoUnderstandingStatistics,”isexcellent,andwe

highlyrecommendit(availablefromwww.teach1�.com).

Oncewehadcollectedthenamesofallthe

firmsthatwishedtoparticipate,weturnedLiz

SeverynsandChuckHeisingerfromourteam

loosetoadministertwosurveystoeachfirm:

1. Culturesurvey,takenbyallemployeesatthe

firm.Anonymous,10-minuteonlinesurvey.

�. Seniorteamleadershipsurvey,takenbythe

CEO’sdirectreports(usually�–1�people).Also

a10-minute,anonymous,onlinesurvey.TheCEO

wasinstructedtotakethesamesurvey,butthe

instructionsforthispersonwereslightlydifferent.

Ratherthanrespondingtothequestionsas

ateammember,theCEOwasinstructedto

predicthowtheteamwouldrespond.

Inthespringandsummerof�010,wecollected

nearly60ofthesetandemresultsandfromthem

builtanentirelynewdatabaseforanalysis.

Astheresultscamein,wescheduleddebriefswitheach

CEO(andanyseniorstaffmembersoftheirchoosing)

todiscusseachsurveyandtheimplications.From

theseinterviews,wewereabletodrilldeeperinto

theresults.Manyoftheinsightsinthispaperwere


��

theresultofthesedebriefs.Wearegratefultoall

theleadersfortheirwillingnesstoparticipateinthe

surveysandtosharetheirthoughtsinthedebriefs.

ByMayof�010,wehadcollectedenoughdatatogive

apreliminaryreporttoouradvisoryboardatFocus

Consulting.EachyearwehostaFocusAdvisoryBoard

(FAB)retreatinChicago,andduringthe�010retreatwe

reviewedourfindingswiththeadvisoryboardmembers

whowereinattendance.Thematerialpresentedwas

madeavailabletoallourFABmembers,listedhere:

Peter Banziger

HeadofAssetManagement&Institutional

Clients,SwisscantoAssetManagement,Ltd

Andrew Canter

ChairmanofInvestmentCommittee&Headof

FixedInterest,FuturegrowthAssetManagement

Glenn Carlson

CEO,BrandesInvestmentPartners

Roger Clarke

Chairman,AnalyticInvestors,

EnsignPeakAdvisors

Nate Dalton

COO,AMG

Jeff Diermeier

FormerCEO,CFAInstitute

Stephen Dunne

SeniorVicePresident,AMP

Britt Harris

CIO,TeacherRetirementSystemofTexas

Mellody Hobson

President,ArielInvestments,LLC

Frank Holmes

CEO&CIO,U.S.GlobalInvestorsInc

Jim Laird

CFO,DiamondHill

Mark Lazberger

CEO,ColonialFirstStateGlobal

AssetManagement

Jane Marcus

SeniorClientPartner,

Korn/FerryInternational

Jeff McCroy

President&COO,

TransamericaInvestmentServices

Michael Mezei

President,MawerInvestmentManagement

Steve Potter

President,NorthernTrustGlobalInvestments

Scott Powers

CEO,StateStreetGlobalAdvisors

Bill Quinn

Former CEO,AmericanBeaconAdvisors

Kim Redding

CEO/CIO,BrookfieldInvestmentManagement

Ed Rosengarten

FormerCEO,EquitiesM&GInvestments

Dr. Andreas Sauer

CEOandCIO,QuoniamAssetManagement

Paul Schaeffer

President,ReFlow

Michelle Seitz

HeadofInvestmentManagement,

WilliamBlair&Company

Kim Shannon

President&CIO,Sionna

InvestmentManagers,Inc

Brian Singer

President,SingerPartners,LLC

Guy Strapp

RegionalHeadofInvestmentManagement,Asia,

andDeputyCEO,PrudentialAssetManagement

Peter Thompson

CEO,PerkinsInvestmentManagement

Maury Tognarelli

CEO,Heitman

Bob Wagner

CEO,VictoryCapitalManagement

James Walsh

FormerCIO,CornellUniversityInvestmentOffice

Kelly Williams

PresidentandCOO,AtlantaCapital

ManagementCompany,LLC

Michael White

President,AddendaCapital

Robert Vanderhooft

CEO&CIO,GreystoneManagedInvestments

The Focus Advisory Board


��

TheFABmembersprovidedusefulfeedbackandprovided

real-time,“fromthetrenches”adviceabouthowtomake

thisinformationmostusefultoinvestmentleaders.

ManyofthelessonslearnedarefromFABmembers.

Towardtheendofthesummerin�010,wehadamassed

enoughdataandfeedbacktoformalizeourfindingsin

thiswhitepaper.Weusedthecollectivewisdomofthe

FocusConsultingteam,listedbelow,todescribethedata

andthelessons.Thedraftofthepaperwascirculated

andreviewedbytheminnofewerthanthreeversions:

LouChrostowski

JohnCooper

AshliGershowitz

ChuckHeisinger

JimKeene

HankKinzie

RenePfaff

KeithRobinson

LizSeveryns

JackSkeen

Inbrief,then,thisistheprocessbywhichwecame

tocollectthedata,reflectonit,andwritedownour

conclusions.Wewelcomeadditionalcomments

andfeedback.Mostimportantly,wethankeachof

youwhohelpedusdiscoverwhatwebelieveare

valuableinsightsforleadersinthisindustry.

Withbestwishes,

JimWare,CFA,andtheFocusConsultingGroup

•

•

•

•

•

•

•

•

•

•


�5

Appendix B: Focus 6 versus the investment industry: criteria for choosing the Focus 6

Firmhaslessthan5%sludge

amongitscurrentvalues

•

Morethan50%ofemployeeswould

acceptpositionatanotherfirmonlyif

substantiallymoremoneywasoffered.

Morethan50%ofemployeesatfirm

believethattheyrankinthetopdecileof

perceivedsuccessversuscompetition.

Morethan50%ofemployeesagreethatthefirm’s

culturesupportseffectivedecisionmaking.

Firmhas15ormoreemployees.

•

•

•

•

Loyalty factor

Thinkaboutwhatleveloffinancialincentiveitwouldtakeforyoutoleaveyourcurrentfirm.Imagineifafirmlike

yoursexistedjustdownthestreet.Whichofthefollowingstatementsmostcloselydescribesyourcurrentattitude:

UNHAPPYCAMPERS: Imightmoveforlessmoney;Idonotliketheenvironmenthere.Iwouldlikeanimprovement

inmyworkingenvironment.

NEUTRAL: Imightmoveforthesameorslightlymoremoney,iftheotherfirmhadagoodreputation.

It’snotbadhere,butI’msuretherearebetterworkenvironments.

HAPPYCAMPERS: Iwouldrequiremoremoneytomove.Eveniftheotherfirmhadagoodreputation,

IbelievethisfirmdoesalotofthingsrightandI’mhappyhere.

RAVINGFANS: Iwouldrequiresubstantiallymoremoneytomove.Thisfirmhascreated

anexcellentworkenvironmentandIamloyaltoit.


�6

FOCUS Consulting Group

Where would you rate your firm's success relative to competitors?

www.focusCgroup.com6

Copyright 2010 The Focus Consulting Group. Use only with permission.

Where would you rate your firm’s success relative to competitors?


�7

Appendix C: Focus 6 firms, company information

Name

of firmLeader Location

Number of

employees

AUM

6/30/10Ownership Client base

Forest

Investment

Associates

Michael

Kelly

Atlanta,

GA

�8 $�.�B Employee

owned

Institutional&

endowment

pooledfunds

AJO Ted

Aronson

Phila.,

PA

�8 $18.�B Employee

owned

Institutional

Snow

Capital

Mgmt.

Carl

Vuono

Sewickley,

PA

�5 $�.9B Employee

owned

Wirehouses

regionalB/Ds

institutional

Retirement

Advisorsof

America

Ron

Simmons

Dallas,TX �7 $1.6B Limited

partnership

Airlinepilots

Disciplined

Growth

Investors

Fred

Martin

Minn.,MN 15 $1.7B Employee

owned

Institutional

The sixth firm chose anonymity.


�8

Appendix D: additional comparisons between Focus 6 and industry

Existing cultures: a comparison of industry* and Focus 6

Industry Percent Focus 6 Percent

Client Satisfaction 52% Client Satisfaction 56%

Ethical/Integrity 42% Professional 55%

Professional 41% Ethical/Integrity 49%

Collaboration/ Teamwork

38% Excellence/ Continuous Improvement

36%

Analytic/ Research Oriented

37% Collaboration/ Teamwork

36%

Intelligent 31% Profit/Financial Success

32%

Balance (home/work) 30% Competence 31%

Results Oriented 27% Accountability/ Responsibility

31%

Accountability/ Responsibility

27% Long-term Perspective/Vision

30%

Excellence/ Continuous Improvement

25% Balance (home/work) 30%

*allfirmsstudied,regardlessofsize


�9

Client Satisfaction 45% Client SatisfactionCollaboration/Teamwork 42% Excellence/Continuous ImprovementExcellence/Continuous Im-provement 41% Profes-sionalEthical/Integrity 37% Ethical/Integrity

Aspirational cultures: a comparison of industry and Focus 6

Industry Percent Focus 6 Percent

ClientSatisfaction �5% ClientSatisfaction �8%

Collaboration/

Teamwork

��% Excellence/Continuous

Improvement

��%


Improvement

�1% Professional �1%

Ethical/Integrity �7% Ethical/Integrity �8%

Professional �6% Balance(home/work) �6%

Long-term

Perspective/Vision

�5% Collaboration/

Teamwork

�5%

Balance(home/work) �1% Long-term

Perspective/Vision

��%

Profit/FinancialSuccess �9% Respect ��%

Accountability/

Responsibility

�8% Profit/FinancialSuccess ��%

Respect �8% Positive �9%


�0

Endnotes

1 Note:OneoftheFocus6firmsdidnotcompletetheentireTeam

Scorecard,sowhenyousee“Focus6”inreferencetotheTeam

Scorecard(F15),itactuallyreferstofiveofthesixfirms.

� JamieDimonatWorldEconomicForuminDavos,January�010.

� SeeAppendixAforcompletedescriptionofmethodology.

� Note:OneoftheFocus6firmsdidnotcompletetheentireTeam

Scorecard,sowhenyousee“Focus6”inreferencetotheTeam

Scorecard(F15),itactuallyreferstofiveofthesixfirms.

5 Inthiscaseonefirmdidnotcompletethesurvey.

6 See“TheTrustProject”onFCGwebsite:www.focusCgroupand

EdelmanGroup“TrustBarometer”:www.edelmangroup.com

7 SeeBrianSinger’schapteron“Meritocracy”inInvestment

Leadership and Portfolio Management (Wiley,�010).

8 See Dan Goleman,EmotionalIntelligence, (Bantam, 2006).

9 Michael Mauboussin, Untangling Luck and Skill, www.leggmason.com

10 Ray Dalio, Principles, www.bridgewater.com

11 Ibid.


�1

The Focus Consulting Group, Inc.

JimWare•[email protected](847)373-8853•www.focusCgroup.com

Our mission To help investment leaders leverage

their talent worldwide.

Our approach JimWarediscussestheengagementwithyour

firm’sleadership,designsacustomapproach,

andbringsincontentexpertswhenappropriate.

Examplesofsuchcollaborationincludesworkwith:

AdamBarnett,McLagan

DaveBauer,Casey Quirk

JimDethmer,Jim Dethmer Consulting

JeffDiermeier,CFA Institute

RonGold,Gold Consulting

JaneMarcus,Korn/Ferry International

MichaelMauboussin,Legg Mason

BrianSinger,Singer Partners

•

•

•

•

•

•

•

•

Jim Ware, CFA

Jim Ware is the founder of Focus Consulting

Group, a firm that helps financial leaders un-

derstandandleveragetheirfirm’shumancapi-

talforcompetitiveadvantage.Authorofthree

booksonleadershipandcultureintheinvest-

mentindustry,allintheWileyFinancialSeries,

hismostrecentisentitled,High Performing In-

vestment Teams,(February,�006).

Mr.WareisaCharteredFinancialAnalystwith�0

yearsexperienceasaresearchanalyst,portfolio

manager,anddirectorofbuy-sideinvestment

operations.Hehastaughtinvestmentsatthe

KelloggGraduateSchoolofManagementand

written articles for various trade publications

includingtheFinancialAnalystsJournal.Heis

on theadvisorystaff for Institutional Investor

magazine and the CFA Board of Regents. His

books have been reviewed inTheWall Street

Journal, Pensions & Investments, Forbes, and

Canada’s Globe and Mail. He has presented

at over 100 CFA events in 18 countries and

writes a quarterly column for their website:

“Firm Success: Leading the Investment Firm”.

Mr.WarehasappearedonFoxNews,Canada’s

“ReportonBusiness”andothernewsshows.

HiseducationalbackgroundincludesaMasters

inBusinessfromtheUniversityofChicagoand

adegreeinphilosophyfromWilliamsCollege,

wherehegraduatedPhiBetaKappa.

Organizational

Foundationaloffsites(vision,values,strategy)

Successionplanning

Compensation&incentivestructures

Firmintegration:eliminatingsilos

Leadership

Assessments(�60,psychometrics)

Development&coaching

Onboardingnewleaders

Personalitytyping&application

Culture

Analysis&management

M&Aanalysis,integration,implementation

•

•

•

•

•

•

•

•

•

•

Team

Enhanceddecisionmaking

Assessments&dynamics

Conflictresolution

Personalitytyping&application

Investment Philosophy & Process

Assessment

Appliedbehavioralfinance

Effectivepost-mortems

Distribution

Marketing/Salesstrategy

Branding

Clientservice

•

•

•

•

•

•

•

•

•

•

Services and metrics offered

Serving over 200 clients in 18 countries, guided by an advisory board of 33 CEO’s from leading investment firms.

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