CFA South Africa September 10, 2009 Culture as a Strategic Advantage
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Transcript of CFA South Africa September 10, 2009 Culture as a Strategic Advantage
FOCUS Consulting Group www.focusCgroup.com1
CFA South AfricaSeptember 10, 2009
Culture as a Strategic Advantage
James Ware, CFA
847.373.8853
www.focusCgroup.com 2
FOCUS Consulting Group
What is your firm’s competitive advantage?
1 2 3 4 5 6 7 8 9 10
32%
14%
7%
9%
2%
5%
16%
9%
2%
5%
1. Great people
2. Superior processes
3. Unique Investment philosophy
4. Work ethic
5. Creativity
6. Independent
7. Owner mentality
8. Ethical/Trustworthy
9. Leading edge IT
10. Focused, limited products
www.focusCgroup.com 3
FOCUS Consulting Group
3 Key Measures of Competitive Advantage1. Trust: building it and maintaining it
2. Culture: defining and living it
3. Management: creating excellent teams
“What you can measure, you can manage.”
www.focusCgroup.com 4
FOCUS Consulting Group
Overview of Culture
What is it? Defining Culture Why is it important? Benefits of Strong
Culture How do you Measure and Manage it? Metrics
Values Strategies
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FOCUS Consulting Group
Culture: The beliefs, values and behaviors that differentiate one organization from another.
Value #3
Value #2 Value #1
X
XX
XX
XX
XX
X
X = Culture Carriers: behaviors and attitudes support the chosen valuesX = Culture Converts: monitor and coach these employees to better reflect all the chosen values X = Culture Outlyers: behaviors and attitudes do not reflect chosen values
Measures:Perfect = 100%
High = 72%Average = 40%Low = 18%
www.focusCgroup.com 6
FOCUS Consulting Group
Benefits of Strong Culture
Attract and retain top talent. Hire for fit much more effectively. Orient new employees quickly into the culture. Promote and compensate based on values. Mentor and coach more effectively. Better weather the tough times. Improve decision making. Create a stronger brand and better story for
consultants and other external audiences.
www.focusCgroup.com 7
FOCUS Consulting Group
Which of these values are most evident in the culture of your firm?
1 2 3 4 5 6 7 8 9 10
11%
8%
13%
8%
7%
10%10%
17%
3%
13%
1. Accountability
2. Balance (home/work)
3. Client satisfaction
4. Clear performance goals
5. Collaboration/teamwork
6. Employee fulfillment/development
7. Ethical/Integrity
8. Excellence/being best
9. Long term perspective
10. Quality/precision/improvement
www.focusCgroup.com 8
FOCUS Consulting Group
Which of these values SHOULD be most evident in the culture of your firm?
1 2 3 4 5 6 7 8 9 10
12%
6%
9%
6%
3%
8%
22%
18%
7%8%
1. Accountability
2. Balance (home/work)
3. Client satisfaction
4. Clear performance goals
5. Collaboration/teamwork
6. Employee fulfillment/development
7. Ethical/Integrity
8. Excellence/being best
9. Long term perspective
10. Quality/precision/improvement
www.focusCgroup.com 9
FOCUS Consulting Group
Culture Measurement: 3 keys
1. Cohesion: Are the staff members on the same page? Do they rally around the same set of values and behaviors?
2. Actual vs. Aspiratational: are the current values similar to the preferred values? Is the culture close to its “ideal state?”
3. Sludge: how much negativity is in the system? How much “bad behavior” lives in the culture?
www.focusCgroup.com 10
FOCUS Consulting Group
Cohesion (Healthy)
Industry
08 09 High Average LowExisting Culture 22% 34% 72% 40% 18%
Aspirational Culture 53% 56% 69% 49% 32%
Cohesion is defined as the percentage of all votes that were for the top 10 healthy existing or aspirational values. Healthy values exclude sludge.
www.focusCgroup.com 11
FOCUS Consulting Group
Strengthening of existing culture
2008 2009Bureaucracy/Territorial 53Risk-averse 42Slow moving/reactive 41Collaboration/Team 30Short-term focus 28Client Satisfaction 27Defensive 27Manipulate/Politics 24Balance (home/work) 21Ethical/Integrity 20
Collaboration/Team 36Risk-averse 36Slow-moving/reactive 36Expense control 34Bureaucracy/Territorial 31Client Satisfaction 31Accountability/Resp. 30Ethical/Integrity
23Commitment 22Defensive 22
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FOCUS Consulting Group
Strengthening of aspirational culture
2008 2009Accountability/Resp. 53
Client Satisfaction 53
Collaboration/Team 45
Excellence/Being Best 40
Global (persp./leaders) 33
Creativity/Innovation 27
Ethical/Integrity 25
Long-term pers./Vision 23
Passion/Motivate 22
Quality/Precision/Imp. 22
Accountability/Resp. 58
Client Satisfaction 47
Excellence/BeingBest 42
Collaboration/Team 40
Creativity/Innovation 30
Ethical/Integrity 30
Global (persp./leaders) 26
Quality/Precision/Imp. 26
Candor/Honesty/Open 22
Adaptable/Nimble 21
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FOCUS Consulting Group
Areas to Strengthen from 2009 survey
Value Asp.# votes
Extn# votes
Gap
Excellence/Being the best 42 9 33
Accountability 58 30 28
Creativity/Innovation 30 4 26
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FOCUS Consulting Group
Sludge: Slows down decision-making and stifles creativity
GossipDramaDefensivenessDisrespectBlameEntitlementShort-term focusBureaucracy/territorialManipulation/politicsSlow-moving/reactive
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FOCUS Consulting Group
Sludge Analysis 2008: 34% of the total votes were for the ten sludge
factors versus the 17% industry average 2009: 22% vs. 16% for industry average Top five sludge factors (# of votes):
2008 Sludge 2009 Sludge
Bureaucracy/
Territorial
53 Slow moving/
Reactive
36
Slow moving/
Reactive
41 Bureaucracy/
Territorial
31
Short term 28 Defensive 22
Defensive 27 Short term 20
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FOCUS Consulting Group
From Values to Strategies
In the following slides, choose the strategy that you think creates the greatest competitive advantage
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FOCUS Consulting Group
1) The team is mostly comprised of individual contributors/free agents and stars or 9) The team is mostly comprised of team-players and loyal types
1 2 3 4 5 6 7 8 9
15%
2%
6% 6%
19%
10%
23%
4%
15%
Mean = 5.7292
1. Very strongly first statement
2. Choice Two
3. Choice Three
4. Choice Four
5. Neutral/Balanced
6. Choice Six
7. Choice Seven
8. Choice Eight
9. Very strongly second statement
www.focusCgroup.com 18
FOCUS Consulting Group
1) Leadership mostly focuses on asset gathering 9) Leadership mostly focuses on investment process and alpha creation
1 2 3 4 5 6 7 8 9
9%
0%
2%
0%
30%
13%
23%
6%
17%
Mean = 6.7234
1. Very strongly first statement
2. Choice Two
3. Choice Three
4. Choice Four
5. Neutral/Balanced
6. Choice Six
7. Choice Seven
8. Choice Eight
9. Very strongly second statement
www.focusCgroup.com 19
FOCUS Consulting Group
1) The investment team mostly uses a consensus approach to investment decision making 9) The investment team mostly relies on “expert” opinion for decision making
1 2 3 4 5 6 7 8 9
9%
4%
19%
4%
13%
6%
19%
13%13%
Mean = 5.3191
1. Very strongly first statement
2. Choice Two
3. Choice Three
4. Choice Four
5. Neutral/Balanced
6. Choice Six
7. Choice Seven
8. Choice Eight
9. Very strongly second statement
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FOCUS Consulting Group
1) The investment team is large and has depth or 9) The investment team is lean and nimble
1 2 3 4 5 6 7 8 9
6%
4%
11%
2%
21%
9%
21%
6%
19%
Mean = 5.9787
1. Very strongly first statement
2. Choice Two
3. Choice Three
4. Choice Four
5. Neutral/Balanced
6. Choice Six
7. Choice Seven
8. Choice Eight
9. Very strongly second statement
www.focusCgroup.com 21
FOCUS Consulting Group
1) The team believes and practices one investment philosophy 9) The team is flexible and uses multiple philosophies
1 2 3 4 5 6 7 8 9
39%
18%
10%
0%
12%
6%
10%
0%
4%
Mean = 3.5714
1. Very strongly first statement
2. Choice Two
3. Choice Three
4. Choice Four
5. Neutral/Balanced
6. Choice Six
7. Choice Seven
8. Choice Eight
9. Very strongly second statement
www.focusCgroup.com 22
FOCUS Consulting Group
1) The firm is responsive to clients, offering them what they want or 9) The firm is internally driven, offering clients what they SHOULD want
1 2 3 4 5 6 7 8 9
19%
6% 6%
0%
19%
4%
32%
4%
9%
Mean = 5.4894
1. Very strongly first statement
2. Choice Two
3. Choice Three
4. Choice Four
5. Neutral/Balanced
6. Choice Six
7. Choice Seven
8. Choice Eight
9. Very strongly second statement
www.focusCgroup.com 23
FOCUS Consulting Group
1) Leadership is results oriented, emphasizing bottom line or 9) Leadership is mission driven, emphasizing the “why” behind the numbers
1 2 3 4 5 6 7 8 9
11%
2%
13%
2%
26%
17%
13%
0%
17%
Mean = 6.0213
1. Very strongly first statement
2. Choice Two
3. Choice Three
4. Choice Four
5. Neutral/Balanced
6. Choice Six
7. Choice Seven
8. Choice Eight
9. Very strongly second statement
www.focusCgroup.com 24
FOCUS Consulting Group
1) The investment strategy relies heavily on process with little human judgment or 9) The investment strategy relies heavily on analysis by individuals, using lots of judgment
1 2 3 4 5 6 7 8 9
2%
4% 4% 4%
23%23%
17%
8%
15%
Mean = 6.6875
1. Very strongly first statement
2. Choice Two
3. Choice Three
4. Choice Four
5. Neutral/Balanced
6. Choice Six
7. Choice Seven
8. Choice Eight
9. Very strongly second statement
www.focusCgroup.com 25
FOCUS Consulting Group
3 Key Behaviors of Top Investment Firms Curiosity Candor Accountability
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FOCUS Consulting Group
Above the line: Curious and Open
Below the line: Defensive and Closed
Fear-based
“CREATIVE”Driver: desire to learn
Tru
st-B
ased
CorporateDrama
Victim: Poor me…
Villain: You’re to blame! Hero: I’ll save the day!
“DESTRUCTIVE”Driver: need to be right
www.focusCgroup.com 27
FOCUS Consulting Group
Candor Mastery – How do you score?0 No mastery: I lie and manipulate the truth to get what I want.
1. I am honest in what I say but I withhold in order to get certain outcomes.
2. I am honest in ALL I say and don’t have any withholds.
3. I speak candidly and am able to differentiate FACT from STORY.
www.focusCgroup.com 28
FOCUS Consulting Group
F exercise: 8 is the correct answer!
1 2 3 4 5 6 7 8 9
3%
0%
5%
8%
0%
28%
35%
8%
15%
1.
2.
3.
4.
5.
6.
7.
8.
9.
www.focusCgroup.com 29
FOCUS Consulting Group
Candor Mastery – How do you score?0 No mastery: I lie and manipulate the truth to get what I want.
1. I am honest in what I say but I withhold in order to get certain outcomes.
2. I am honest in ALL I say and don’t have any withholds.
3. I speak candidly and am able to differentiate FACT from STORY.
4. I speak candidly differentiating FACT from STORY and I hold my story lightly not needing to be right.
5. I speak candidly differentiating FACT from STORY, holding my story lightly, and not blaming or criticizing when I speak.
6. I model and live candor such that people around me move toward candor in their lives because of my presence.
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FOCUS Consulting Group
Accountability
Accountability = 100% responsibility + Making and keeping clear agreements
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FOCUS Consulting Group
Thank you South Africa for inviting me! Questions, Comments?
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FOCUS Consulting Group
Decision Rights
Time
LevelOf Buy-in
Leaderdecides
Leader decidesw/input
Subgroupdecides
Subgroupdecidesw/input
Majorityvote
Consensusw/fallback
Alignment
www.focusCgroup.com 33
FOCUS Consulting Group
Culture Cohesion (Healthy)
Industry Firm A High Average Low
Existing Culture 22% 72% 40% 18%
Aspirational Culture 53% 69% 49% 32%
Cohesion is defined as the percentage of all votes that were for the top 10 healthy existing or aspirational values. Healthy values exclude sludge.
www.focusCgroup.com 34
FOCUS Consulting Group
Top 10 Values – Existing & Aspirational1. Bureaucracy/territorial2. Risk averse3. Slow moving/reactive4. Collaboration/teamwork5. Short-term focus6. Client satisfaction7. Defensive8. Manipulation/politics9. Balance (home/work)10. Ethical/integrity
1. Accountability/Responsibility
2. Client satisfaction
3. Collaboration/Teamwork
4. Excellence/being the best
5. Global (perspective, leadership)
6. Creativity/Innovation
7. Ethical/Integrity
8. Long-term perspective/Vision
9. Passion/Energy/Motivate
10. Quality/Precision
Red font = sludge valueGreen font = Top 10 match between existing and aspirational value
www.focusCgroup.com 35
FOCUS Consulting Group
Sludge Analysis
34% of the total votes were for the ten sludge factors versus the 17% industry average
Top five sludge factors (% votes): Bureaucracy/territorial (8%) Slow-moving/reactive (6%) Short-term focus (4%) Defensive (4%) Manipulation/politics (4%)
www.focusCgroup.com 36
FOCUS Consulting Group
Manager Scorecard (Focus 14)
US Equity Team: Scorecard 1 2 3 4 team Ldr. Gap USEquity Industry Gap1. We have a clear purpose. I know what our team is trying to achieve. ___ 5 5 4 5 4.75 5 0.25 4.79 3.90 0.892. I know my role on the team and what is expected of me. ___ 5 4 4.5 4 4.38 4.5 0.13 4.40 4.00 0.403. I have the resources to do my work well. ___ 4 5 4.5 5 4.63 4 (0.63) 4.52 3.70 0.824. We have the right team members to accomplish our goals. ___ 3 4 3 4 3.5 3 (0.50) 3.42 3.50 (0.08)5. I feel valued and appreciated for my work. ___ 4 4 3.5 5 4.13 3 (1.13) 3.94 3.70 0.246. I trust and respect the people on our team. ___ 3 4 2 4.5 3.38 5 1.63 3.65 4.30 (0.65)7. I experience a high level of candor and openness on our team. ___ 4 4 4.5 4.5 4.25 4 (0.25) 4.21 3.70 0.518. My opinions matter on this team. ___ 4 5 4.5 5 4.63 5 0.38 4.69 4.00 0.699. I have clear performance goals that measure my success on this team. ___ 3 2.5 3 4 3.13 3 (0.13) 3.10 3.30 (0.20)10. In the past 3 months, I have received performance feedback from my manager. ___ 4 3 2 5 3.5 3 (0.50) 3.42 3.70 (0.28)11. We make and keep clear agreements on this team. ___ 4 2 2 4 3 4 1.00 3.17 2.90 0.2712. My work allows me to use my talents and abilities. ___ 4 5 3 5 4.25 4 (0.25) 4.21 4.00 0.2113. Leadership encourages my development and growth. ___ 4 4.5 4 4 4.13 4 (0.13) 4.10 3.70 0.4014. I feel that my work is important to reaching our firm’s goals. ___ 4 5 5 5 4.75 5 0.25 4.79 4.40 0.39
3.73 3.93 3.5 4.53 4.03 4.04 0.009 4.03 3.77
Industry = 45 investment firms
FOCUS Consulting Group www.focusCgroup.com37
U.S. InstituteNovember 12, 2008
Leadership & Talent Development
James Ware, CFA
847.373.8853
Jamie Ziegler
847.853.8251