Three Keys to Strong Leadership Teams

It just happens that FCG has been working with several Executive Committees (ECs) recently. The work involves helping them to come together as a highly functioning team that can effectively lead in this new era. They all have newly-added members which means that they must progress through the stages of:

  • Forming (excitement and optimism about the future)
  • Storming (reality of differing expectations, decision rights, Ego contests)
  • Norming (process of agreeing on goals, roles, structure, ground rules)
  • Performing (gelling as a highly functional team)

There is no way to bypass these predictable stages. Naïve leaders (low EQ) try to move from Forming to Performing with the rationale, “Hey, we’re all intelligent professionals, let’s just get to work.” Would an NFL coach say the same thing? “Hey, we’re all great football players, let’s go out on Sunday and win. See you then.” Not by a long shot. Roles are carefully articulated, a game plan is designed, film of the opponent is reviewed, and strong teamwork is supported.

By contrast, savvy leaders acknowledge the developmental process and roll up their sleeves. Specifically, they get three things right. They are:

  • A clear purpose and direction
  • The right team members for the EC
  • A high level of trust

Clear Purpose and Direction

Good leaders get this right on two levels. First, for the firm at large. Increasingly, investment firms are realizing that a purpose beyond “grow and make money” is needed. A recent study by SSgA and the CFA Institute called Discovering Phi (link to paper) shows in detail how purpose contributes to firm success. The paper states that the industry has been characterized by “passion without purpose.” Only 44% of investment professionals believe their leaders articulate a compelling vision of success. We used the Phi paper and many other sources to expand on this topic in our new book, Money, Meaning, and Mindsets. (PDF of book) The big idea is to combine passion and purpose to create a highly motivated work force. And to provide a clear strategy for achieving the vision of success. In this sense, good leaders answer two big questions: Why are we doing this? And How are we doing this?

Second, good leaders define the purpose for the EC. Mostly, members of an EC are the heads of various functions. Eight or fewer members is a good number to shoot for. Surprisingly though, these high-ranking professionals are not clear on the purpose of the EC. What does this committee do exactly? Many times, ECs devolve into MCs (Management Committees) which discuss tactical matters: Is the IT group up and running with the new system? How is the new product launch coming? Have we hired a new lawyer on the legal team? Little wonder that EC members often dread the meetings.

So, what is the proper role of the EC? Most successful teams do the following:

  1. Define and articulate the purpose of the firm
  2. Define and manage the culture of the firm (by example)
  3. Develop and track the strategy for the firm
  4. Communicate the above to all firm members. Provide clarity.

There are other charges as well, like talent acquisition and development, succession planning, compensation philosophy, and the like. But the four big ones listed above are foundational. When the role of the EC is carefully defined, then good leaders can wrestle with the next decision: right team members.

Right Team Members

For all the ECs that FCG works with, this has been a thorny issue. For an EC to function well, it needs both skill and chemistry. Some leaders stack their EC with investment professionals, with the logic being “we are an investment led firm.” Fine. But are the investment members of the EC good at vision, mission and strategy? Do they care about it? Or would they prefer to simply run their strategies? And what message does this send to the critical non-investment staff? Just today we spoke with a CEO who has a five-person EC, consisting of: Head of Sales, Head of Marketing, CFO, and CAO. (Chief Administrative Officer) We were surprised that only the CEO himself represented the investment functions. We asked the obvious question: Why is the CIO not on the EC?(!) The response: “He has no interest in managing people or developing strategy. He just wants to do investing.”

Alternatively, we work with an EC that has ten members and six of them are investment professionals. We know for a fact that several of the investment people are on the EC because they were asked to be by the CEO. Otherwise, they have no strong interest in the role.

So, what is the right way to form an EC? Again, back to the purpose statement for the EC. If you agree that the EC is largely charged with the four functions listed above, then a leader must think carefully about who has the skillsets—vision, strategic thinking, exemplary behavior, and communication skills. The people with these skills may not be the usual suspects, i.e. the C-suite titles. Most likely, it is a sub-set of these individuals who have the skills and, importantly, passion for the work. EC work is different from the daily functional role. FCG breaks leadership into three “hats”: self, team, and firm. Many professionals are well-suited for the first two, but not the third. It requires an ownership mindset that says, “I am now wearing the firm hat which means I am considering the success of all stakeholders. Not just my area.” Finally, a leader must build an EC that has the right chemistry among the individuals. And this brings us to the third factor, trust.

High Trust

Assuming a leader has defined the role of the EC, and pulled together team members that have the right skillsets and interest level, the question remains: do they work well together? The core of this question is: do they trust each other? Our work with teams involves carefully defining trust (with six factors) and then asking the team members to assess themselves and their team mates (1-10 scale). We then use voting devices to answer the question, “How many team members have at least one low score on the trust factors?”  Results from two ECs are given below:

The number of EC members on each team is the sum of all the votes cast, so the top chart has 9 members, the bottom chart 10. Notice that both teams indicate there are trust issues. And while the top team does have four members who indicate no trust issues, they also have a team member who has trust issues with everyone! Same for the bottom team. ECs will only perform at their best if they minimize trust issues.

So, how does a team do that? Very simply, address and resolve the issues. But here’s the sticking point. Many of us believe that our colleagues really don’t want to know about their trust issues, so we hold back for fear of insulting them. Hence, the trust clearing conversations never happen and trust remains shaky. After watching this phenomenon for several years, we finally developed a voting slide to address this fear. We ask the team members, “Would you rather know about trust issues, or remain in the dark?” In other words: do you want your colleagues to just “sit” on their concerns, or do you want feedback on them? The voting slides for the two teams above are as follows:

Not surprisingly, the team members all agree: I would rather hear about the trust issues than remain in the dark. So, here is the invitation to do the trust work. Your team members have told you, “I want the feedback.” Are you willing to give it to them?

In addition, FCG provides tools to handle these trust clearings in a skillful manner. Two critical factors are: 1) approaching the conversation in a constructive way (you are trying to help), and 2) delivering the feedback respectfully (no blaming or demeaning). Also, separating fact from story is useful. What are the unarguable facts and what is your story about them? Minimizing trust issues and building positive chemistry then is the final piece of the “Big Three.”

Developing a strong EC is no easy task. But there are clear guidelines for doing it. And in these challenging times, the need to get it right has never been greater. Hmmm, maybe that’s why many firms are reaching out for help.

Curiously yours,


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Purpose Power: Motivating Investment Professionals

How do you bring out the best in investment professionals? How do you motivate them and get them fully engaged? (Gallup estimates that less than 30% of U.S. workers are engaged.) The myth for decades has been: “Show me the money!” The more you pay me, the more you motivate me. Simple.

Fortunately, State Street Center for Applied Research (CAR) and the CFA Institute have teamed up to dispel this myth. In a recent piece called Discovering Phi, Suzanne Duncan and her team dug into this topic using SDT (Self Determination Theory) as a framework for researching motivation. SDT assesses motivation on a scale ranging from extrinsic to intrinsic motivators, defined as follows:

Extrinsic Intrinsic
·       Emotional pressures

·       Bonuses

·       Status

·       Winning and competition

·       Doing something important

·       Believing in what you do

·       Doing it because it’s right

·       Doing it because we love it

Extrinsic motivators are carrots and sticks. They represent external influences that attract or repel. Bonuses attract. Threatening bosses repel. Conversely, intrinsic motivators—aptly named—are independent of influences outside of us. When we do meaningful work, we are naturally motivated. When we do the right thing, virtue is its own reward. When we love our work, we thrive. Ideally, doing purposeful work that we love is as good as it gets.

So, which is more effective in obtaining investment success: extrinsic or intrinsic? The phi study revealed that a one percent increase in phi—based on a diagnostic created by CAR—is associated with:

  • 28% greater odds of excellent organizational performance
  • 55% greater odds of excellent client satisfaction
  • 57% greater odds of excellent employee engagement

There you have it: more success and more engagement when intrinsic motivators are at work. For shorthand, you can interchange the word phi with purpose. More phi equals more purpose which drives more motivation which leads to better results. What actions can investment leaders take to build phi in their firm?

Action Industry Data
Articulate a compelling vision. Only 44% of investment professionals believe that their leaders do this.
Remind staff of their fiduciary duty. Only 46% of retail investors believe that financial institutions operate in the client’s best interest.
Create an inspirational statement of purpose (A mission statement that explains the “why” for the firm.) Only 5% of managers believe their mission statement has a significant positive influence on the day-to-day lives of their employees.
Teach and coach employees. Only 33% of investment professionals believe this is occurring at their firm.

The above are just some of the actions that leaders can take. Others include:

  • Aligning staff with work they love to do
  • Developing a set of core values that is meaningful to the staff
  • Connecting the goals of the firm to purpose
  • Providing staff members with autonomy: how, when, and where they do their work.
  • Encouraging and supporting continuous learning

CAR’s phi-agnostic measures the level of phi in an organization. It measures the extrinsic/intrinsic motivators for each respondent (i.e. staff member), then aggregates them for a firm score.

Sadly, over half of the investment professionals in the pilot survey (N = 1486) had low phi scores. (And 13% had NO phi!) Given the evidence that high phi contributes to commercial success and employee engagement, firms should jump on this bandwagon. Right? (CAR offers the phi-agnostic to interested firms at no cost.)

Some have. One of the best firms that we (FCG) know—we call them “Focus Elite”–learned about the phi-agnostic and eagerly signed up for it.  (Did I mention it’s free?) CAR crunched the numbers and came back with these results:

No surprise, the “Focus Elite” firm rocked it. Their high phi score more than doubled the number for the industry. And, their overall score was excellent. High phi firms do exist. And in the case of the firm shown here, their strong culture and superb leadership deliver excellent investment results. We are eager to collect more data, especially from our Focus Elite firms who presumably should have high levels of phi, given similar levels of strong leadership and culture.

Moving from industry averages on phi to specific elements, we polled a roomful of CFA charter holders in Toronto during a presentation on phi. The 40 attendees were asked to identify which elements of phi were alive and well at their firm.

The strongest response was “Acting in the best interest of clients,” but only 50% of the attendees felt that was true at their firm! (The phi research from CAR indicates that only 38% of investment professionals “believe that their organization is acting in the best interests of their clients.”) Clearly, from these results, the industry has not embraced phi yet.

Skeptics may read this and think, “Damn straight! The Almighty Dollar has ruled for a long time, and I’m not changing my bets. Money motivates. Besides, good accountability requires a little fear in the organization. Workers need to know that they’ll lose their jobs if they don’t perform. So, I’m still a carrot and stick guy.”

Here’s the danger in doubling down on this view. In a word: millennials. Waving around carrots and sticks has far less influence on them. Gallup calls it, “Purpose over Profits.” In their research, they found millennials are deeply interested in meaningful work and doing good in the world. Additionally, millennials are far more likely to leave a bad culture (read: fear and blame) than the prior generations (Xers and baby boomers). To attract and retain top young talent, the older generation must adapt to a new world. One where purpose trumps profits.

A second danger in trotting out carrots and sticks is the advent of knowledge work. Dan Pink writes convincingly about this shift in Drive. Extrinsic motivators are effective for industrial work, like assembly lines. Give workers a bonus for making more widgets and they’ll produce more widgets. Unfortunately, this approach—more carrots—doesn’t work well with knowledge workers. In fact, it can backfire. A simple study with children and reading illustrates this point. Two groups of children were asked to read books. One group was paid to do it. The other simply read for pleasure. Both groups successfully finished their reading assignments. The lesson came after the study was completed: The paid readers refused to read unless they were paid. The other (nonpaid) group continued reading because they had learned that reading was fun. The lesson was clear: If you train people to think that an activity is only worth doing if it is rewarded, then they’ll insist on a reward. The key variable here is intrinsic versus extrinsic rewards. Intrinsically, reading is fun, so we naturally will do it, regardless of an extrinsic reward. But if we link reading to extrinsic rewards—like money—then we feel cheated if we aren’t paid for it. The investment world has trained a whole generation of workers to feel that investment work must be highly rewarded. This causal connection exists even though a strong motivator for investment workers is “the nature of the work itself.” We have talked to countless investment professionals who say, “This work is fascinating. I’d be doing it for myself even if I weren’t paid anything.” (In other words, investing their own funds privately would be satisfying.)

Dan Pink, Frederick Herzberg, and now Suzanne Duncan (CAR) have shown conclusively that a shift from extrinsic to intrinsic improves motivation. In Pink’s view, the biggest intrinsic motivators are:

  1. Purpose: doing something meaningful to make a difference
  2. Autonomy: freedom to achieve the task in one’s own chosen fashion
  3. Mastery: continually improving, making progress towards greater excellence

The phi-agnostic emphasizes purpose but includes autonomy and mastery as well. Future leaders of investment firms would be wise to shift their mindsets from extrinsic to intrinsic motivators. Otherwise, they risk losing valuable talent. So, step away from the carrots and sticks…and bring on the purpose, autonomy, and mastery.

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Money, Meaning, and Mindsets: Radical Reform for the Investment Industry

For those of you worried about me, I was not kidnapped or worse.  The explanation for my absence is simpler:  procrastinating.  (It got so bad, I was exercising instead of writing.)  In my defense, I had a good excuse:  working on our new book.  But that was pretty much done in February.  Since then, I’ve just been milking it.  Oh yes, and working with clients.  There’s that.

Finally, partner Liz wrote me for a third time:  are you ever gonna put out another LOL?

Ok. Back to work.

We originally titled our book, “An Investment Vision: Asset Management as a Noble Calling, something something, bla bla.”  Immediately we received feedback:  “that’s boring.”  After getting defensive, going under the line, and cursing our reviewers, we reluctantly agreed.  They were right.  (Don’t you hate feedback?  Especially when it’s accurate?)

Anyway, Keith and I revisited the title over beverages on a long flight to Europe and came up with the title you see above.  And our reviewers liked it.  (“See, Jim, feedback is good…”)

There are three big ideas in our new book.  (Depending on the day of the week, they change…)  Today, I’ll summarize them as:

  1. Passion without Purpose
  2. Tyranny of the ORANGE mindset (explained below)
  3. Emergence of new mindsets

Passion without Purpose

We start the book by establishing common ground:  everyone wants to be happy.  Aristotle called happiness the “goal of goals.”  (Name-drop Aristotle and everyone must fall in line, right?)  So, how can the investment industry help with that mission?  How does the industry help the average person attain financial well-being so that they have a better chance of achieving happiness?  As obvious as it seems—that the industry must address the needs of ordinary people—many investment professionals seem unaware of this basic point.  We use a quote from a client engagement to reinforce this message:

“The happiness or otherwise of clients is not really relevant.”

This quote is juxtaposed to another one from the same engagement:

“I believe that helping people putting their savings to work and achieving good returns will enable them to live better, happier lives.”

In a nutshell, the difference between these quotes sums up a major problem with the industry.  This difference was identified and written about in a paper by Suzanne Duncan and the CFA Institute called Discovering Phi.  They call the problem “Passion without Purpose.”  There’s no question that most investment professionals are passionate about their work.  They love studying companies and markets and playing a high stakes game that unleashes their competitive juices.  That’s passion.  But only 17% of these professionals claim that they are also motivated by purpose.  So, their passion for investing is a bit like my passion for crossword puzzles:  I love doing them, but it doesn’t serve any purpose.  I just think it’s fun.  (And if someone paid me a lot of money to do them, I would have found my career years ago.)  But there’s no purpose involved in my solving the daily crossword.  For many investment professionals, it’s similar.  They love the challenge and the work, and they do get paid a lot of money.  But they don’t associate their efforts with a greater cause.  They don’t see themselves as part of a bigger enterprise—the financial sector—that is contributing to the well-being of people on the planet.  How do we know this?  Well, Duncan’s work supports it with thorough research.  But more simply, FCG knows it because we routinely ask investment professionals, “Why do you do this work?”  We rarely hear a statement of WHY they do the work.  Instead we hear statements of WHAT they do:  “We invest to beat our benchmark on a risk-adjusted basis.”  Ok, fine. But WHY do you do that?  When we push them on this WHY question, we often hear, “We have to perform in the top quartile in order to attract AUM and grow.”  Sometimes the answer is as direct as, “If we don’t, we’ll lose our jobs.”

With this last answer, let’s segue to one of our models that we use to explain mindsets in the industry:  Abraham Maslow’s hierarchy of needs.  Keeping it simple, Maslow said we have two kinds of needs:

  1. Deficiency: survival, security, belonging/relationships, mastery/self-esteem
  2. Growth: service, common good, purpose, making a difference

The former are the ones that we all must satisfy to alleviate anxiety.  Without these necessities, it’s harder to be happy.  Once we’ve satisfied these basic needs, then we more readily look to our growth needs:  service, purpose, making a difference, giving back.  The deficiency needs stave off anxiety, the growth needs give us joy.

Back to our discussion of purpose, the majority of investment professionals operate from the deficiency needs rather than the growth needs.  They are anchored in these fear-based needs—I don’t have enough money, power, fame, etc.—rather than aspiring to the growth needs:  how can I be of service? How can I make a positive difference?  And so they don’t connect the dots from the daily work of investing to the larger question of:  how does the industry serve the world at large?  The perplexing part is that the investment industry does have a legitimate and important role in doing just that: helping the average person achieve happiness through financial security.  And this is a BIG need.

A recent survey showed that 76% of American adults worry about financial issues.  My guess: it’s even higher.

And connecting purpose to motivation–the message in Duncan’s white paper–reveals that purpose is indeed a strong motivator for knowledge workers.  Maslow, Dan Pink, Frederick Herzberg and others support this same conclusion.  Maslow wrote:

The self only finds its actualization in giving itself to some higher goal outside oneself, in altruism and spirituality.

In a healthy adult, who has largely met his/her deficiency needs, it’s natural to aspire to the growth needs, i.e. a higher goal outside of oneself.  The investment industry displays a kind of stunted growth in its selfish preoccupation with the lower needs.  (Read: Ego)  So, why is that?

Tyranny of the ORANGE mindset

The mindset of the investment world explains a lot of their “selfish” behavior.  FCG hopes that writing about this issue—bringing awareness to it—will help solve it.  (Sunlight is a strong disinfectant.) Awareness is an important first step in solving any problem.  In our view, the investment world is made up of hard working, smart, and very decent people.  Bernie Madoff’s are an exception.  If the average investment professional better understands the common investment mindset—Grave’s called it ORANGE—there’s a good chance their behavior will change.  At least that’s the plan.

So, what is ORANGE?  This term comes from Spiral Dynamics, the brain child of Claire Graves.[1]  He studied the evolution of cultures and mindsets and discovered that they change over time in a predictable way, based on survival needs.  The chart below is from the book and shows these mindsets:



Stages of cultural evolution Key features Theme Key Values Investment examples Maslow




Integral Self:  personal freedom to all without harm to others or the physical environment.  Limit the excesses of self-interest.  Focus on self-expression and systemic approaches. Live life fully & responsibly, with little fear, and with appreciation for all “previous” mindsets Purpose



Common Good

(High SQ, i.e. Spiritual Intelligence)

Just emerging now. The firm of the future “Growth Needs”

Higher purpose


Greater Good

Relatively little fear

Communalist/ clan


Relational Self:  collaborative.  Share resources among all.  Reach decisions through consensus.  Liberate humans from greed and dogma. Seek peace within, and harmony in community Trust and respect




(High EQ)

Bridgeway, Boston Common, Polen, & ESG firms Transformation, moving past prior levels, seeing past “me” to “we”
Rationalist/ ORANGE Rational Self:  search for success and enhance living through strategy and technology.  Seek independence and autonomy.  Play to win and enjoy competition. Act in your own self interest by playing the game to win Success




(High IQ)

Hedge funds, many traditional active managers, like Disciplined Growth Investors Mastery, autonomy


Guardian Self:  bring order and stability to all things and control impulsivity through a higher authority.  Sacrifice now for later rewards.  Laws & discipline builds character Life has meaning, direction & purpose with pre-determined outcomes Organized





Vanguard, traditional bank trust departments Connection, belonging, loyalty

Our view is that the investment industry has been largely driven by the ORANGE mindset.  FCG does a lot of personality work in the industry, and we can support this claim.  But most readers probably agree just looking at the chart that ORANGE fits for many investment organizations.  ORANGE has a number of strengths:  drive, smarts, continuous improvement.  All the typical competitive, type A traits.  If you want something done well and fast, give it to ORANGE.  They are full-speed-ahead types.  The downside of ORANGE is that they are individualistic, success-oriented, and more focused on tasks than people. (Fortunately, one of the authors, Michael Falk, CFA, started his career as a self-declared ORANGE—he’s evolved beyond that in my view–so we had an “expert” on our writing team.)

For ORANGE, clients can become a conceptual goal that leads to success rather than real people with real needs.  Hence, abstract concepts like benchmarks, efficient markets, and beta are more interesting than helping Mr. and Mrs. Smith.  The book provides many statistics to support the claim that clients are NOT happy with their investment experience.  (For example, the Edelman Trust Barometer, which places asset managers near the bottom.)  Spiral Dynamics helps explain this phenomenon: the fox has been in charge of the hen house, with predictable results.

Emergence of new mindsets

If you are reading this and thinking, “Wait a minute, that’s not true about me at all!”  Then you are probably more GREEN than ORANGE.  GREEN is more people-focused than task-oriented.  GREEN is more communal and values relationships.  And, evidence suggests that GREEN is a growing factor in the investment landscape.  Our book describes this evolution in detail, with both aging baby boomers and millennials playing a large part.  The growth in socially responsible investing is a tangible result of GREEN’s influence.  GREEN is more about social welfare, personalized outcomes, and client service. ORANGE is more about capital allocation, scalability, and alpha.  Duncan estimates that 60% of the resources in the asset management business go to the latter.  FCG believes that there is a place for ORANGE/active management, but smaller than the current level.  Only the really good, value-add (after fees!) active managers should survive.  The bulk of the investment industry should be aimed at helping people achieve financial well-being.  And as Charley Ellis points out in the forward to our book, financial planning by competent financial advisors is way more helpful to average citizens than incremental alpha. (Charley’s new book, The Index Revolution, argues that basically all investors should move to index funds.)

Still another mindset emerging out of GREEN is what Graves called the YELLOW mindset.  This mindset aligns with Maslow’s growth needs, that is, the top of the hierarchy.  YELLOW has two significant differences from any prior mindsets:

  1. YELLOW has largely met all the deficiency needs, and is mostly driven by the growth needs. In short, YELLOW is what we call “higher self” motivated vs. Ego-driven.
  2. YELLOW is the first mindset to see that the other mindsets each have their own legitimacy. YELLOW sees that BLUE, ORANGE, and GREEN each have a valuable function. The other mindsets have the view, “We are superior; they are inferior.”  A typical Ego view.

We spend a significant amount of space in the book describing YELLOW and how this mindset is best suited for the complexities of the New Era in investing.  Fortunately, there are some very good materials emerging about how to develop YELLOW leaders.  One is a book called Spiritual Intelligence by Cindy Wigglesworth.  Another is A New Psychology of Human Well-Being by Richard Barrett.  And still another is The Integral Vision by Ken Wilber.  All these books embrace Graves’ theory and describe a plan for evolving into YELLOW leadership.  The good news is that BLUE, ORANGE and GREEN can all evolve into YELLOW.  It involves moving from Ego to Higher Self.  Simple, but not easy.

Our book will be out soon.  We hope it has a powerful and positive impact on the investment world. (Look for it on Amazon in May)  The big idea in the book could be summarized as follows:

The industry should move from doing well to “doing well and doing good.”

And our answer is by embracing meaning and new mindsets.

Happy to be back and writing,


P.S.  One of the big contributors to our book was Fred Martin, CEO of Disciplined Growth Investors.  Fred cares so deeply about this topic that he is hosting a conference devoted exclusively to client/advisor relationships.  Speakers include Charley Ellis, Suzanne Duncan.  For more go to the website:

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[1] And subsequently supported by a lot of very bright thinkers.  NOTE:  ORANGE is chosen randomly, with no meaning assigned to the color.


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.


Managing Millennials (20-35 year olds)

Should you worry about “generational differences?”  That’s today’s question.  After all, people are people, so shouldn’t you treat them all the same?  With respect and dignity.  Fairness.  Trust.  Same old stuff.  Right?

Not according to the top dog at Gallup.  When asked, “Are millennials really that different?”  Jim Clifton responded, “Profoundly so.”  And FCG agrees, having seen their impact on investment cultures.  But not all investment leaders see it that way.  Here is a vote from a roomful of investment leaders on the topic of managing millennials:

Two dissenting votes.  And these two leaders were not dragging their knuckles and breathing heavily through their mouths.  Quite the opposite.  They were sharp, good leaders.  Their rationale on voting no: “If you are a good manager, then you need to understand your people and deal with each of them individually.”  Each DID manage millennials and was doing it successfully because they WERE acknowledging the uniqueness of each employee.  What these two excellent leaders failed to realize is that many of us could use a “heads up” with regard to millennials.  We don’t necessarily see them as different so we make the mistake—in our busy work days—of treating them like boomers, i.e. older workers.  And, even if we do see the millennial difference, it still doesn’t answer the question:  “So, what are the new rules according to millennials?  And how does a firm respond to them?”  FCG’s experience with millennials reveals 5 major changes to be aware of:

  1. Purpose
  2. Development (which includes lots of feedback)
  3. Autonomy (made possible by technology)
  4. Transparency
  5. Causes


Gallup describes it as “Purpose over Paycheck.”  A survey of millennials showed the following shocker: Over 60% would rather make $40K in job they love, than $100K in one they think is boring.  One of the participants in the classroom mentioned above commented, “I tried to influence my millennial daughter to go into investing and she stopped me and said, ‘Mom, I’d rather shoot myself.  I like working in a rescue shelter.’”  Ok, then.  Boomers and Xers (the “older generations”) seem to understand this drive for purpose, as they chose it above all other motivational factors in this vote:

If you want to engage millennials, you need to understand their desire to do something meaningful.  And meaningful does NOT mean “make a lot of money.”  Investment leaders have to be able to articulate why their firm is contributing to a better society.  In FCG’s view, this should be an easy task, but many older leaders have trouble with it.  They’ve never really thought about it.  They are practical people who are deep into running the firm.  Purpose doesn’t really enter their thinking.  So, as a leader of millennials, be able to articulate a solid reason why the firm contributes to a better world.  For example:  “Our firm exists to positively influence people’s financial lives.”[1]  See?  It doesn’t have to be tricky, just clear and purposeful.


Note in the graph above, the second highest vote-getter is “development opportunities.”  FCG sees this factor in all of the culture work we do.  The biggest gap value in firms—that is, the difference between what firms “have” and what they “want”—is “leadership development/mentoring.”  And to show you how millennial dependent this factor is, take a look at the “want” vote in one firm when we slice the data by age groups. Employees at the same firm were asked to select 10 values that they want more of. Here is what the boomers said:

Notice, there is no demand for “leadership development/mentoring.”  Now look what the same firm’s millennials said:

Notice that “leadership development/mentoring” comes out as the 4th highest aspirational value, with nearly 40% of the millennials choosing it.

This is a typical response at investment firms.  So, what are the millennials asking for?  They want career paths:  what’s next for me?  How do I learn new skills and progress?  They want coaching and mentoring. Who will show me the ropes and take a sincere interest in my development?  They want feedback, and LOTS of it.  In other words, they want attention.  They had it from their “helicopter” parents and from their teachers, now they want it at work.  When millennials quit, the exit interviews often reveal, “I wasn’t getting enough face time with my boss.”  So, if you want to keep your talented millennials, you’d better find a way to meet these needs.


Millennials have grown up with technology, so they understand that knowledge work can be done anywhere.  Their mantra is, “work is something you do, not a place you go.”  Old-school bosses have to re-program their minds to understand this.  FCG has responded to this new reality by partnering with Jody Thompson, author of the book Why Work Sucks and How to Fix it.[2]  Jody developed the Results-Only-Work-Environment (ROWE) concept and has implemented it globally for firms.  She has helped boomers understand the shift from face-time to results-only.  We introduced Jody to two investment firms, each one a top firm as measured by leadership, culture and performance.  Interestingly, one firm embraced ROWE and in fairly short order moved to practices like no vacation policy and no office hours. (In other words, take vacation when you want and spend as much or as little time at the office as you wish.  Just make sure you deliver results. Jody is fond of saying, “No results. No job.”)  The second firm could not make the mental shift and balked at the program.  The first firm’s CEO told us recently that productivity in his view has increased.  The second firm still struggles with bouts of employee discontent, as workers complain about being treated unfairly in the “flex-time” arrangement.  With ROWE there is complete autonomy so all the grumbling about fair flex time goes away!  Here’s the catch:  managers in ROWE need to be very clear about roles, responsibilities and deliverables.  In other words:  accountability.


Millennials expect full transparency in the work place.  They are suspicious of “need-to-know” communication policies.  Old-school, command-and-control thinking revolves around the concept that leaders have the information/solutions and workers execute their orders.  This approach was fully prevalent in the 1950’s and 60’s.  As the workplace shifts from command-and-control to facilitative leadership, where collaboration is the rule, the millennials are asking the obvious question:  “why can’t we have full access to information?”  The knee-jerk response from many boomer bosses is a chest-grab of fear.  “Are you kidding?!  We’d lose all control!”  (One leader smirked, “You’re suggesting we give the keys to the inmates?”  Then it was OUR turn to do a chest-grab.  You think of your staff members as inmates?!)  To be clear, some information requires confidentiality for legal reasons or for reasons of integrity (a promise made to NOT share information).  We understand that.  But far too often leaders withhold information because “we’ve never shared it before.”  In other words, there is no valid reason to withhold.  It’s just the way it has always been done.  FCG has seen many cases of increased trust, respect and morale when leaders open the kimono and begin to share more and more information with staff members.


Millennial’s interest in causes extends well beyond pledging to United Way.  Millennials have logged more volunteer hours in their short lives than the Xers and Boomers have combined.  Investment firms that allow themselves to be a conduit for volunteer opportunities will attract millennials.  Increasingly FCG’s clients have set up foundations to support worthwhile causes.  A client example: The mission of our Foundation is to make a positive impact by actively engaging all employees in identifying and supporting charitable organizations of excellence.  Another client donates 50% of profits to their foundation which actively engages in causes like ending genocide on the planet.  Talk to your employees.  Find out what they care about.  Get involved.

Solutions and Common Ground

Wise leaders will pay attention to the needs of millennials because they will be over half of the workforce by 2020.  FCG offers these tips:

  1. Accept that millennials bring new values and attitudes to the work place and respond accordingly. The “big 5” discussed above are important to millennials and must be addressed in some measure.  If you wish to attract and retain top young talent, then you have to build a desirable workplace.  Millennials differ from prior generations in that they are quick to assess and leave poor cultures.  (Boomers leave jobs after 7 years, Xers 5, and millennials 2.)
  2. Recognize and leverage the common ground areas:
  • Collaboration/teamwork. As you see in the culture survey results above (ABC firm), all generations embrace collaboration.  So, you can always bring conflict back to, “We all want to work well as a team.”  Invoke mutual purpose and work out a solution.
  • Respect/trust. These pillars of strong culture are also important to both generations. Willingness to understand and respect different viewpoints builds trust.  Take a curious stance towards different values.  Don’t be the leader in the cartoon below…
  • Accountability. Each generation accuses the other of being “entitled.”  Entitlement ends when accountability starts.  FCG has found that all generations embrace accountability.  The key is to create accountability while eliminating fear and blame.  This can be done through clear roles, responsibilities, decision rights, and goals.  Plus, skillful feedback: both positive and negative.  FCG has yet to hear talented millennials or boomers say, “No way. We do NOT want that sort of accountability here!”

Returning to our two dissenting leaders mentioned earlier, we applaud them for doing a fine job managing millennials.  Our advice to them?  Keep up the good work, but please, don’t spread the word that “all generations are the same, just be a good manager and you’ll do fine.”  Why? Many of us are not born leaders and we need all the help we can get.  The tips offered above will help.  And if you ignore them, you may lose some talented workers.  And it won’t be like the old days where they “quit and stay.”  They will quit and leave!

Curiously yours,


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[1] Thanks to Michael Falk on our team, as he first suggested this purpose statement which was the driving force behind his recently published book on entitlements and sustainable economic growth. See his website for more on the book and how to order a free copy:

[2] For more on results-only-work-environment see Jody’s website: