What makes an investment team more successful than others is not only about skill and talent, but also about how team members engage with each other and the broader organisation they operate in. In other words: the team’s culture.
Bronisław Malinowski’s 1922 magnum opus, “Argonauts of the Western Pacific: An account of native enterprise and adventure in the Archipelagoes of Melanesian New Guinea”, is widely considered as the foundational work of the discipline of economic anthropology.
It describes an intricate exchange system, called the Kula, that sees inhabitants of the Trobriand Islands travel vast distances to trade valuable objects.
But apart from its commercial aspects, Malinowski quickly realised the practice wasn’t purely motivated by economic considerations.
The elaborate ceremonies associated with the exchange also fulfilled a key role in maintaining social cohesion and reinforcing tribal bonds between the different island groups.
We always say the soft stuff is really the hard stuff, and actually getting people to be aligned with an organisation's mission, its culture and to deliver value is actually quite tricky
Culture as much as economics was the driving force behind the system and kept it alive.
When assessing what makes some investment teams much more successful than others, the Thinking Ahead Institute, an initiative founded by Willis Towers Watson, realised talent and remuneration weren’t the only factors.
Also here, culture, and in extension good governance, were key drivers in achieving consistently good results.
If you can combine these three aspects – talent, culture and governance – into a coherent whole, then companies have the ability to create ‘super teams’, the Institute argues.
“We always say the soft stuff is really the hard stuff, and actually getting people to be aligned with an organisation’s mission, its culture and to deliver value is actually quite tricky,” Marisa Hall, Head of the Thinking Ahead Institute, says in an interview with [i3] Insights.
“It opens up almost a Pandora’s box of issues because people are complicated, right? So this brought out our work on culture, it brought out our work on thinking about diversity, equity and inclusion, and the need for stronger teams.”
The Institute has identified a number of ingredients it sees as essential in building super teams.
It starts with talent, but also emphasises cognitive diversity, so that teams avoid the dangers of ‘groupthink’ and blind themselves to potential risks outside of their usual considerations.
Governance is the ingredient that establishes a framework of investment beliefs and principles, while setting rigorous guidelines for decision-making processes and accountability.
But where culture comes in is in the establishment of trust and the creation of a psychologically
safe space to express ideas and raise issues when they occur. Creating a strong corporate culture starts with building social capital, Hall says.
“When we talk about social capital, we’re talking about building networks, relationships and collaboration. And if you’re able to harness the power of social capital and tie it into productivity, then that ties into better and stronger-performing teams,” she says.
Unless a team thinks about inclusion, diversity, measurement, accountability and their belief system, we would argue that you're not having all cylinders firing
“So unless a team thinks about inclusion, diversity, measurement, accountability and their belief system, we would argue that you’re not having all cylinders firing.”
But what is productivity? Hall says we need to expand the concept beyond the purely economic definition of output and include the conditions for value creation, such as employee well-being.
“Productivity is a multifaceted concept. Historically, it has been linked to effectiveness, but actually the definition of productivity, particularly when you’re thinking about it in the context of the future of work, has to be widened to include well-being and has to be widened to include work-life integration,” she says.
She acknowledges this is not always easy to measure and will need to include short-term and long-term measures that include aspects such as the willingness to collaborate and the turnover of employees in an organisation.
But there are also methods companies can use to improve collaboration and create the right conditions for highly efficient teams.
“If you have a team of actuaries, then you can for instance add probabilities to some of their convictions. So if they say ‘yes, I agree with this’, then what percentage of conviction do you have?” she says.
Another technique is the Delphi method. Under this method, meeting participants vote anonymously at the start of the meeting, after which a discussion takes place. At the end of the discussion, another anonymous vote takes place, with the idea being that opinions will eventually head towards a general consensus.
“There are lots of tools you can use to draw out differences and produce more robust decisions, including red team, blue team (where two teams are tasked to take opposing sides on a decision being considered), devil’s advocates and pre-mortems,” Hall says.
Super teams are not created instantly and often it takes an organisation many decades to work out the winning formula.
When Hall interacts with clients on these issues, one of the key areas she sees organisations struggle with is articulating a framework for shared beliefs and then creating a system of robust measurements around the building of social capital and corporate culture in order to track progress.
Often, it can be quite confronting for the management and board of an organisation to write down their core beliefs as it gives them few places to hide when things go wrong. But that is exactly the point.
“Many organisations might say: ‘Well, we kind of have an inkling of what we believe’, but actually writing it down and putting a structure around it is much harder because then the belief system comes under scrutiny. That is when it gets tested,” Hall says.
“So it’s a higher measure of holding yourself accountable, but what it does allow you to do is, when markets are turbulent, when things aren’t going quite right, to understand the basis of what you’ve done.”
[i3] Insights is the official educational bulletin of the Investment Innovation Institute [i3]. It covers major trends and innovations in institutional investing, providing independent and thought-provoking content about pension funds, insurance companies and sovereign wealth funds across the globe.