The Trust Ceiling: An Upper Limit on Success

The data confirm that trust is critical to success.[1] No wonder so many firms reach out for help in this area. As a matter of common sense, leaders are getting it: without high levels of trust, we are handicapping ourselves. Indeed, the data support their hunch. Trust puts a ceiling—or upper limit—on how much success a firm will enjoy.

FCG performs Team Scorecards on intact investment teams. These scorecards include 24 well-researched factors that lead to team success. Given the nature of the questions and the quantity of data (i.e. lots), these Scorecards give us useful insights about trust, candor, debate, and many other factors, including success (defined as “achieving results”). In fact, our colleague Bryan Kozlowski and I are hard at work on a white paper digging deep into the data, but for now I want to tease out some headlines. These five factors are highly correlated with trust:

Factor Statement Correlation
I experience a high level of candor and openness on our team. .88
Conflict is addressed and resolved in a constructive way; we know how to “deal with it” and move on. .83
We have common values and norms that promote good teamwork. .83
We have a strong sense of team spirit; we feel a sense of connection. .82
We have open and productive debates. .75

For starters, every team we work with wants more candor. They want frank discussions, lively exchanges, open kimonos. Is there a correlation between trust and candor? The data (from 29 teams that filled out our Scorecard) shout, “Yes!” to the tune of a correlation coefficient of .88. For these same teams, the mean score for trust (on a 1-7 likert scale, with 7 = strongly agree) is 5.40, and the average for candor is 4.80. Here’s the clincher: no team scored candor higher than trust. None. In every case, the teams are saying, “We will NOT achieve high candor without high trust.” Trust puts a ceiling on candor.

How about conflict resolution? Another frequent request of team leaders is, “Help us resolve tension on the team.” Conflict and team spirit are correlated: .80. That makes sense: the more conflict, the lower the team morale. So, does trust correlate with conflict? Indeed: .83. And the clincher again: no team scored “resolve conflict” higher than “high level of trust.” Trust also puts a ceiling on conflict resolution.

If you are thinking, “Well, trust probably correlates with everything on a team!” Not so. There are team factors that are not heavily dependent on high trust. These factors appear largely unrelated:

Factor Statement Correlation
I have clear performance goals that measure my success on the team. .30
My work allows me to use my talents and abilities. .29
I know my role on the team and what is expected of me. .24
I feel that my work is important to reaching our firm’s goals. .09
I have the resources I need to perform my work well. .06

These results make intuitive sense. The first two factors—goals and roles—are more about clarity. Has the leader articulated them clearly? Leaders can achieve these ends without building high trust on the team. The next two factors seem more individually driven. A team member could be in a role that allows them to use their talents and contribute strongly, without experiencing a high level of trust on the team. Finally, budget constraints might limit resources but not damage trust. Or so the data suggest.

Four teams in the data base are what we call “Focus Elite” firms. These firms demonstrate strong leadership and culture and good success.[2] If we ask how do their factors “trust” and “success” compare to the other firms in the database, we can construct this table:

Team Trust Factor (mean) Success Factor (mean)
Focus Elite (4 firms) 6.6 5.9
Other firms (25 firms) 5.2 4.9

This comparison is not quite apples-to-apples. The Focus Elite data are from the leadership teams of these firms, whereas some of the remaining firms (the “25”) are functional teams. Nevertheless, the data are suggestive. (Our white paper will look at these comparisons more critically.)

The headline here is rather obvious: trust matters. A lot. That’s become conventional thinking for most leaders. But the underlying message is: teams need to move beyond acknowledging that trust is important to actually improving it. Perhaps seeing the data will motivate leaders and their teams to act. Trust is only improved through communication. Feedback is crucial. So is an honest self-assessment, a willingness to see that you might be part of the problem. On a positive note, FCG has seen many teams improve their trust scores. So, it is possible. But it takes commitment, courage, and communication.

Stay tuned for our white paper on trust. And in the meantime, you may want to read some of FCG’s prior blogs about building, repairing, and maintaining trust:



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[1] I am apparently the last of a dying breed that still acknowledges “data” as the plural for datum. Eventually I will give in to popular opinion and write: “the data confirms…”

[2] For more on these firms, read our white paper called, “Linking Culture to Success



Top Performing Equity Teams in Practice

In another installment of the “Blind Squirrel sagas,”[1] we’re pleased to say that the squirrel team found another acorn. My fellow squirrel Michael Falk and I wrote a white paper last Fall called “Top Performing Equity Teams: The Common Factors.” (available on our website; click here to read.)  In that paper, we presented our findings about the common factors that were identified by ten top equity teams. There were five “hard” factors, like disciplined process, and five “soft” factors, like emotional intelligence (EQ) that contributed to the success of the ten firms.

Recently, an excellent equity boutique firm invited FCG to discuss the paper at their annual offsite. By “excellent” I mean strong alpha production since inception (10/1/2008)[2] vs. the relevant benchmark. (Like many good alpha shops, this one likes to stay “under the radar” and asked NOT to be named.) The first day of the offsite involved meeting with the five-person investment team. Shortly after we started the session, I put up a voting slide showing the top ten factors that were identified as common to the top firms. I asked the participants to vote on whether or not they thought their firm excelled in these areas. (The vote was a simple “toggle” for yes or no.) The results were as follows:

I was surprised by the strength of the results. Eight of the ten factors showed a resounding “yes, we are good at this factor.” In retrospect, it probably shouldn’t have surprised me, as I knew going in that this boutique had a strong track record for alpha. In only two areas did the team acknowledge possible weakness: diversity of thinking styles and capacity for good debate.

On the first point, I can say that the team actually DOES have a diversity of thinking styles. FCG uses the Enneagram personality assessment to measure this factor, and the results for this team are shown below:

Five investment team members and five different thinking styles. That’s as good as it gets for cognitive diversity. In working with this team, it was evident that they each bring different strengths to the investment research and decision making.

Considering good debate, the team brainstormed the question, “How can we do better?” They came up with these suggestions:

  • Start: Employ a “devil’s advocate” process to hear counter-points to a given proposal. Use Pre-mortems to test an idea: “if this idea does NOT work out, why did it fall apart?” Hold a follow-up session with the advocate for an idea in which s/he is asked additional questions about the suggested stock.
  • Stop: Reading the written conclusions of participants BEFORE the actual meeting, so as to avoid anchoring.
  • Continue: Writing down thoughts in the meeting before hearing what others have to say. (This is useful in two ways: leveling the field for introverts who aren’t as vocal, and reducing conformity bias.) Pushing for increased clarity about assumptions and underlying facts. Continue to be respectful of each other.

In my view, the team demonstrated a high level of candor in openly discussing how their process could be improved. Though not perfect, they are well on their way to good candor and open debate.

In our whitepaper, we discuss what a “dream team” would look like. These are the characteristics we would consider in building one:

Factor Dream Team Ideal Firm’s Score
Size of Team 4-6 5
Enneagram At least 4 types 5 types
Decision Makers Multiple PMs Yes
Gender Diversity Mix of both genders 3 women, 2 men
Ideal Team Player Humble, Hungry, EQ JW’s view:  yes
Genius (play to their strengths) Know and align with it Yes, see chart below.
Ground rules (curious, candid, accountable, appreciative) Psychological safety Yes, very much so. Very safe feel.
Motivation Intrinsic (Mastery Autonomy, Purpose) Yes, not driven by Externals:  like money.

 As you can see from this table, the firm in question nearly perfectly embodies the characteristics of a dream investment team. A few other factors that contribute to their success:

  • They are independently owned, so they can control their own destiny.
  • Their mission does NOT include growth. They are 100% devoted to strong performance, and have capped their funds.
  • The investment professionals get to spend the majority of their time on investment work, as shown in this chart:

This single chart may be one of the most powerful indicators of performance. Namely, do your talented investment professionals get to immerse themselves in their work? Or, are they distracted with meetings, red tape, and interruptions? It was evident from spending time with this team that they love their work and are free to do it. (Given this reality, I was a little concerned about their view of my taking up their time! Did they want to skip all this and get back to the markets?!)

For the second day of the offsite, the investment team was joined by the operations team, so all 13 members of the firm were present. With everyone together, we explored the culture of the firm. FCG’s research shows that strong culture is essential to success. It was no surprise, then, that this firm showed a strong and cohesive culture. Here is the vote on which values were alive and well in the firm:

Keep in mind that these votes are anonymous, so there is little incentive to game the system. The only value that could be nominated for improvement is Leadership development/Mentoring. In FCG’s industry work, we see that this is an “up-and-coming” value, largely based on the younger members of the workforce. In my opinion, this firm and other forward-looking ones will embrace this challenge and improve their offerings in this area.

So, there you have it. A firm that is following our white paper formula almost to the letter and, no surprise, enjoying great success. We blind squirrels so enjoy it when we stumble upon another acorn, and this one was a big juicy one! Stay tuned for another installment of the blind squirrel sagas!

Curiously and happily yours,

JW, squirrel #1

[1] Have to confess, I love the ravenous little squirrel in “Ice Age” movies.

[2] Since inception annually: outperformance of 2.7% net of fees vs. relevant benchmark.

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The Best Investment Teams, their Secret Sauce

Under the heading “better late than never,” FCG finally conducted a study to see what factors power the best investment teams.  (We’ve been in business just under 20 years, and we eventually stumbled upon this brilliant idea…)  Michael Falk and I have worked with a number of really good equity investment teams, so we devised a survey to see:

What are the common factors—if any—that these great teams share?

We agreed on 40 factors that might lead to superior performance of an investment team.  We used our basic model of teamwork, shown below:

Michael embeds with teams often and provides insights and recommendations for improvement.  He is especially sharp at the process piece.  Do they have clear processes?  Are they repeatable?  Does they work?  How can the team continuously learn and improve?  My interest is more on the relationship side. Do the team members work well together?  Do they trust each other?  Are they candid?  Do they have good debate?[1]

We will summarize the complete study in a white paper, but here I want to share insights on the relationship side of the puzzle.  Indeed, there are four factors which the best teams said are critical to success:                             (drum roll, please…)

  1. We are committed to one another’s success. (93% of respondents agreed)[2]
  2. We enjoy working with each other. (89%)
  3. The members of our investment team debate well. (86%)
  4. As a team, we have emotional intelligence. (85%)

Let’s look at these factors individually.

Committed to one another’s success

The best investment teams are “all in.”  They are not dependent on “stars.”  (That factor scored only 21%.)  Rather, they operate as a closely aligned, well-trained unit.  Some of the comments on this factor were as follows:

  • Our process and our success is built upon the team and its commitment to each other. Without that commitment, I don’t think we’d have the culture of trust which allows us to be creative, make mistakes, and still show up deeply excited to be there the next day.
  • Everyone is “all in” and genuinely shares in each other’s successes.
  • I consider all my colleagues to be ‘work friends’. Great bunch of people with whom I enjoy spending time.  We are all aligned in delivering a common outcome.

This week Michael and I worked with members of one of these elite teams.  Indeed, the sense of commitment was palpable.  And that level of commitment contributed to remarkable candor and transparency in their discussions about engagement levels, succession plans, and capacity constraints (for their strategies).  They openly talked about their expected tenure and likely candidates to move up and replace them.  Michael and I commented privately that it was rare—and wonderful–to see this level of disclosure and active listening.  FCG has been teaching candor skills to teams for years, and this team was especially good.  They routinely use language like “fact vs. story” in their discussions of investment ideas.

We enjoy working with each other

Note, the question was not, “Do you enjoy working with each other?” but rather “Does this factor contribute to investment success?”  A team could enjoy working together but produce mediocre results.  In this case, the elite teams said that this factor contributed to superior performance.  Comments were:

  • High level of mutual respect, similar work ethics, detail orientation, curiosity, integrity, ownership mentality and skill. And fun.  We do very much enjoy each other’s company.
  • In a collaborative environment, people need to be able to work together in flexible teams.
  • The culture of our firm is the key ingredient which draws out the genius of its members. If we didn’t like working with each other, or for the firm, we would be hard-pressed to contribute–over the course of years–the deep creativity necessary to our success.
  • Goes to the culture, we have a strong one.

Google recently studied its best teams and found that the most significant factor in great teams was “psychological safety.”  This term means that team members feel comfortable being “real” with their team mates.  When teams are open and honest with each other, it builds trust and allows for greater creativity, as stated in the comment above.  Personally, I love my team mates at FCG and I know it contributes to our ability to deliver value-add for our clients.

The members of our investment team debate well

This factor seems to follow naturally from the first two factors.  When I am playing on a team of committed individuals, who genuinely enjoy being together, I am much more likely to feel safe in rigorous debates.  Again, that was our experience when we worked with an elite team recently.  They had some remarkably honest debates about tough subjects, like whether or not to close certain funds.  Comments on this factor were as follows:

  • This is critical and we are always challenging ourselves that we are facilitating this and provoking debate.
  • A debate be won or lost along many different dimensions (logic, charisma, authority, experience, etc.), and our team needs to understand which lines of argument are useful and permissible, and to skillfully use them. The success of an idea depends not only on the quality of the idea, but its communication to the whole team, and debate is an important element both of ensuring quality and communication.
  • Yes and getting better with communication training.
  • All debates are focused on improving the returns for the portfolio while simultaneously reducing risk. Only constructive criticism is given and it is not focused on the analyst, but the idea.
  • We still need to get better at discussing mistakes and being intellectually more open. But generally we do this quite well.

FCG draws a distinction between three types of exchanges:

  1. Arguments. These take place “under the line” and are antagonistic in nature.  They are typically not productive.  They emphasize personality, “my idea is right; yours is wrong.”  Egos are prominent.
  2. Debates. These are encouraged as good exchanges in which both parties are respectfully seeking the truth.
  3. Dialogue. These exchanges are wonderful to watch, as they are largely egoless discussions in which all parties commit to learning and leveraging their knowledge.  Participants are not interested in winning the debate but rather finding the best ideas.

One survey participant commented:

  • We emphasize dialogue over debate.

Indeed, only teams with high levels of trust and candor can hope to have true dialogue.

As a team, we have emotional intelligence

The term “emotional intelligence” (EQ) was coined by Daniel Goleman and consists of four skill sets:

  1. Self-awareness: the ability to know one’s own strengths, weaknesses, and blindspots.  Plus being aware of one’s thoughts and feelings in the moment.  The ability to self-reflect.
  2. Self-management: the ability to manage one’s thoughts and feelings.  Example: If I know that I am prone to defensiveness when my ideas are challenged, then I can stop myself from becoming argumentative.  How?  By asking the other person a question, such as, “Help me understand, why do you see it that way?”  (Choosing “mutual understanding” rather than winning the argument)
  3. Other-awareness: the ability to read other people’s thoughts and feelings.  Instead of becoming preoccupied with my position, I can scan the room to see how others are participating.  Are they listening?  Are they still engaged?  Has someone dropped out of the conversation?  Is someone offended?
  4. Managing my relationships: the ability to use my interpersonal skills to manage the conversation so that it is productive.  People remain engaged and proactive.

Emotionally intelligent teams are far more productive than teams on “auto-pilot.”  Comments from our elite teams were:

  • We recognize this is a very fickle business and that mistakes are made. Therefore, there is a level of ego and confidence that is mandatory, but it is also extremely important to be able to admit what you don’t know, encourage others and learn from the inevitable mistakes.
  • In a collaborative environment, we need people to feel safe evaluating each other’s ideas. We could do a better job of speaking fairly and considerately, in order to spur honest feedback.
  • We have no space or time for ‘prima donnas’ or outsized egos. We believe strongly that good teamwork with well-connected individuals in a constructive environment drives superior and more sustainable outcomes.
  • We need to be able to rigorously challenge an idea and the work that went into it, and still walk away from the table as colleagues and friends. That is not easy, and it takes a lot of emotional intelligence in terms of how you conduct yourself in a debate, and how you manage your emotions before and after.
  • Our team is highly emotionally intelligent and collaborative.
  • I do think our culture and our team is a huge intangible asset to our success.
  • Team culture and dynamics is a key consideration for every hire within the firm.
  • I suspect compared with peers, we have more “emotional intelligence” than “discipline”. Emotional intelligence is more difficult to develop as it needs a well-aligned, well-performing and stable team environment and it take time.

As the FCG partner who has dedicated two decades to studying and teaching the “soft” skills, I find it very rewarding to see top investment teams acknowledge their importance.  In our full report, Michael Falk will go into more detail about the process factors that were identified.  Both are necessary:  good relationships and good process.

Stay tuned.

Curiously yours,


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[1] Michael Falk notes, “I always emphasis the debate piece when I embed because it’s crucial to the execution of the philosophy and process.”

[2] The survey consisted of a scale from 10 (critical to our success) to 1 (unimportant to our success). The percent scores show all the responses of 6-10.