High Performing Investment Teams: How to Achieve Best Practices of Top Firms

It was relatively easy for any money manager to prosper during the 17-year bull market, Jim Ware, principal at Focus Consulting Group Inc., Long Grove, Ill., told a group of chartered financial analysts in New York in January 2005.

"During the ’90s, Forrest Gump could have managed a successful investment firm," Mr. Ware told the assembled CFAs. One wag in the audience responded: "He did!"

Mr. Ware relates this story and others in "High Performing Investment Teams: How to Achieve Best Practices of Top Firms" (John Wiley & Sons, New York, 210 pages). Co-written with Jim Dethmer, also a principal at Focus, the book discusses how a money manager can build a lasting and successful culture that relies on teamwork. Their previous book, "Investment Leadership," dealt with how top management can build a strong culture.

Mr. Ware writes that CEOs no longer quiz Focus professionals on why they should worry about soft issues: "Even the thickest-skinned, toughest-minded investment leader understands that the so-called soft skills are critical in attracting, retaining, and motivating talent."

Focus’ client list includes leading investment institutions such as UBS Global Asset Management, Northern Trust Global Investments and Analytic Investors Inc.

It’s no mean trick guiding investment professionals, which Mr. Ware likened to herding cats in a recent conversation.

In the new book, Mr. Ware cites Chris Argyris, a Harvard Business School professor, on why it’s hard to manage smart people. Because many professionals rarely fail, they don’t know how to learn from the experience.

"Instead, they become defensive, screen out criticism, and put the ‘blame’ on anyone and everyone but themselves," Mr. Argyris wrote in a famous 1991 Harvard Business Review article quoted in the book.

Members of high-performing investment teams recognize when they’re being defensive, and choose to return to more open attitudes, Mr. Ware wrote. Changing that defensive behavior is tough, but simple things such as moving around, deep breathing and listening carefully to others can shift the mood, he explained.

Many of Messrs. Ware’s and Dethmer’s guidelines boil down to lessons that may appear naive. That’s because open-mindedness and candor and praising others can be very tough standards to live by.

Here’s their advice in a nutshell:

• Be curious. Be open to learning from mistakes.

• Take 100% responsibility — no more, no less — for your actions. Don’t play the victim or the hero. Firms that don’t waste time finger-pointing are more nimble and creative.

• Make agreements only that you want to make and for things over which you have control. What’s more, write them down.

• Be candid. That includes separating fact from fiction, which yields superior analysis.

• Eliminate corporate drama, which siphons away energy and creativity.

• Use your intuition as well as your intelligence.

• Focus your and your staff’s efforts on their natural strengths, instead of spending countless hours trying to improve their weaknesses.

• Appreciate and praise your staff. Research shows that, in the most successful firms, positive feedback outweighs the negative by a ratio of 5-to-1.

Reducing Messrs. Ware’s and Dethmer’s lessons to bullet points does them a grave injustice. That’s because so much of their message has to do with the process of how people deal with conflict and with each other.

So stop the finger-pointing, the cringing, the over-the-top heroics. Read their book.

By Joel Chernoff, Pensions & Investments