Where Teamwork Thrives in the Money Management Industry

Recently, my colleagues at the Focus Consulting Group and I surveyed more than 100 asset management firms around the world, testing both for the strength of their cultures and for the effectiveness of their leadership teams. Perhaps this will come as no surprise, but the two turn out to be closely linked.

To gauge their cultures, we asked the rank and file of these organizations to indicate their level of agreement with various statements that might describe their work environment. Six firms in particular scored significantly stronger than the average firm in five areas we consider markers of a strong, positive culture:

  • Effective Decision Making
  • Loyalty and commitment
  • Ability to attract top talent
  • Cohesion of culture (rallying around the same core values)
  • Success relative to competitors

We honored these six as our "Focus Elite" in recognition of their cultural advantage. And we are not the only ones to think it is an advantage. Of the investment professionals we surveyed, fully 94% agree with the statement: "Culture is important to our firm's success." Why do they think so? For them, the key benefit is "effective decision making." Both are interesting findings from an industry often seen as celebrating lone geniuses and superstars. Perhaps these professionals believe strong culture creates an environment in which individuals are freed up to do their best thinking. Perhaps they believe better decisions result from productive collaboration.

At the same time that we were surveying organizations broadly, we also surveyed their senior leadership (a group ranging from five to twelve in number, always including the CEO) about their effectiveness as a team. On a seven-point scale, they were asked to respond to 15 well-researched factors that define strong teamwork. The same "elite" six firms that demonstrated superior cultures also posted senior leadership teamwork scores that are significantly higher than average. In particular, they distinguished themselves from the rest of the investment industry on five dimensions (click to see larger image):


The average scores for the Focus Elite firms are significantly higher at the 95% confidence level. So we can say with conviction that these factors truly differentiate the top firms. The firms whose people enjoy most cultural advantages are the ones with well-functioning leadership teams.

Additionally, when correlations are run on these five teamwork factors, they tend to be highly correlated with each other. The direction of causation is not altogether clear, but what is clear is that these factors tend to form a cluster: their presence or absence is linked. They make up the "secret sauce" of firms that are well managed and demonstrate strong culture.

Team leaders must assemble the right team members in the right roles with the right core values so that the team members can confidently say, "Yes, this group of people can achieve the mission." Over time, the team must develop trust by having clear rules of engagement and accountabilities. This trust then allows the team members to move beyond "politically correct" conversation or "politically incorrect" confrontation to fruitful debate and dialogue. Finally, the top teams — our Focus Elite — practice strong appreciation for one another. They understand the power of focusing on the positive and not dwelling on the negative. And while they seek continuous improvement, they acknowledge and return to their core strengths, leveraging them again and again.

Focus Elite leadership teams also value these factors more highly. A separate measure in the survey asks the respondents to indicate the importance of a given factor. Four of the five factors above are rated significantly higher by the Focus Elite. The only factor that is not rated more important is compensation. In other words, although these executives believe their firms "do" compensation very well (and presumably all senior team members feel fairly compensated), they are no more likely than the typical money management firm to believe it is vital to get compensation right. What we know from other analysis of our Focus Elite firms is that in fact they do not pay top dollar for talent. They pay well, to be sure. But their compensation philosophies are clear: we reward good performance and provide a great work environment. We do not recruit team members whose main motivation is money.

If you've read Dan Pink's book, Drive, you know that this lines up well with a great deal of workplace research. He notes that knowledge workers are mainly motivated by: 1) mastery, or continuous improvement, progress; 2) autonomy, or freedom to operate independently; and 3) purpose, or meaningful work, not busywork. Compared with these powerful intrinsic motivations, money is a weak, extrinsic one. Focus Elite firms seem to understand that real motivation is an "inside job."

At the other end of the "important" spectrum, Focus Elite leaders show an unusual commitment to getting the trust factor right. Our interpretation of this is that it relates to other surveys of investment professionals which indicate that their top desire for improvement in their firms is to achieve more open communication and debate. We think our Focus Elite recognize that these cannot occur in environments with low trust.

Teamwork is not the only key to success in the asset management industry. Client Satisfaction, Excellence, Ethics/Integrity, and Professionalism round out the top five values that leaders know their firms must embrace. But few deny that teamwork is vital. And because the firms with the most skill at it also appear to have the most will to hold onto that advantage, they may hold their cultural edge for a good, long time.

This post is part of the HBR Insight Center on The Secrets of Great Teams.

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