There are other elements of a good reality map, but these are some of the most important. Ideally, the senior team will collect this information via surveys, documents, and interviews (best conducted by a neutral — read “confidential” — party). Therefore great leaders must work hard to get an accurate reality map, including all the good, the bad, and the ugly. Once the leadership is seeing reality fairly accurately and has created a truly compelling vision of success, then they are ready to address the culture issue.  

 

Performance Culture: The core behaviors

 

The core behaviors of high performing investment teams include the following elements:

 

Trust: As the antidote to fear, trust is at the core of a high performing team. Unless there is a sufficient amount of trust in a team or firm, the other behaviors will not evolve. For example, in an environment with little trust, I will not feel safe being candid.

 

Curiosity: Top teams have members who are open to feedback from all sources and who use it constructively. They develop the ability to wonder about how outcomes were created and to ask questions like: How did I contribute? How can I do better? When they do become defensive, they know how to shift to a more open and receptive mindset.

 

Candor: World class decisions can only come from teams where members are fully candid. Because no one sees reality fully or accurately, we must rely on one another to paint a more complete picture. Research shows that the ability to fully vet an idea contributes to the best decisions.

 

Accountability: This mindset believes that whatever occurs in my life, I will assume responsibility for it, not blame it on others or my bad luck.

 

The flipside of the performance culture occurs when fear is rampant in an organization. People are naturally fearful; as part of evolution we developed the fight or flight reaction. All of us have three core needs: security, approval, and control. When one of these gets “triggered,” the more constricted and reactive people become, and in short, the more fear in an organization. In short, when we get fearful, our ability to think and perform is greatly reduced. Instead of being curious and wanting to learn, we constrict and want to win the argument which limits our chances to make top notch decisions. Game theory would say that team members need to learn cooperative behavior versus betrayal behavior, the main part of which is building trust.

 

As fear builds, people rely on old strategies to survive. The villain resorts to an age-old strategy of blaming someone else, the quicker the better. Another reaction to fear is to give up. Victims go passive and say, “poor me.” There is also the "hero" character in the drama triangle that plays the role of “fixer.” The hero comes in uninvited to solve other people’s issues. Only he does not really solve anything, he just puts band-aids on issues. Often the hero burns out from over-functioning and becomes villain or victim-like. Worse, the hero encourages others — unconsciously — to be victims.

 

Starting at the top, members of the senior team must begin to see when and how they themselves exhibit these traits. They must educate themselves about the skills needed to be a high-performing team. These skills are not developed overnight. We recommend that a senior team take three to six months to practice these behaviors before introducing them to their direct reports. The danger of introducing them too soon is a cynical reaction from the staff: “You don’t practice these behaviors. Why should we?”

 

Culture Change: The Process

 

Culture has to start at the top. You are taking on the firm’s “status quo” when you initiate a cultural change, so be prepared to encounter resistance. In fact, most firms that try to build performance cultures fail. McKinsey & Co. puts the number at 70 percent. Nearly three-quarters of the 70 percent figure is explained by two cultural factors: either management behavior does not support change (management does not “walk the talk”), or employees are resistant to the change (they cling to the existing culture.) Our experience in the investment industry is similar. Never underestimate the survival instinct of the “existing culture.” It will fight hard to live on. Most people love the status quo and resist change.

 

So, how would an organization go about implementing culture change? Step by step, as described below is much more effective than all at once. The latter is chaotic and usually results in cynicism. Step by step looks like this:

 

1. Leader’s clear commitment to making culture a strategic advantage for the firm. Because culture reflects the personality of the top person, he must be clearly on board and committed to the process. By leader we mean the person who directly manages a given area of a firm.
2. Senior team discusses and agrees on values and behaviors that will provide a competitive advantage. Rationale for each one is explained. Senior team commits to living by these chosen values and behaviors, and to be open to measurement by peer review and direct report review. Goals are clarity of culture and alignment around it.
3. Senior team aligns around key behaviors (3-6 months) and is measured, alignment is confirmed.
4. Senior team passes on values/behaviors to their direct reports by acting as role models, explaining behaviors to direct reports, and reinforcing behavior through structure and rewards

5. Cultural norms are rolled out to entire organization

As stated above, several values/behaviors are core to high performing cultures, including ethical behavior, curiosity, accountability, and candor. Additional values and behaviors that relate to the firm’s investment philosophy or client service process are added to this core list.

This article does not pretend to represent all aspects of a culture initiative. Rather, it is meant to highlight the difference between paying “lip service” to culture and the hard work of actually creating a high performing culture. Only a handful of companies have achieved a distinctive cultural advantage in the investment industry. The key to their success is a deep conviction that culture represents a strategic advantage that cannot be bought or quickly duplicated by competitors.