investment managers, assessment
"Value" is always the theme for universities and other endowment foundations employing investment managers, but even more so during volatile times. Good managers are almost worth their weight in gold which, at current market rates, is heading towards $3,000.
So it wasn't surprising that the performance of investment managers, and the retention of the best managers, was one of the major themes at the recent IMN's 5th annual Foundations & Endowments Summit in San Diego (September).
I was on a panel discussing how we can evaluate the performance and retain investment teams. The discussion centered on several key issues regarding talent.
Performance Assessment is a Moving Target
We hear from candidates that performance assessment is something that is always “evolving” and is often overlooked. In an “investment performance” culture, this omission could be costly if it means that human capital could be underperforming. To assume that individuals will identify their own weaknesses and address them on their own is a risky venture.
In addition, the normal performance assessment cycle at institutions of higher education is based on a June 30th year, while investment performance typically follows the calendar year.
Performance Assessment is a Key to Retention
While there are many important factors in retaining investment talent, the one most often cited is compensation. Most universities and foundations have a market-based compensation system that levels the playing field considerably. Instead, there needs to be both market-based compensation and robust performance assessment. Still, there is a general understanding that a key element of the CIO’s duties - to provide substantive performance evaluations to staff members – is sometimes overshadowed by the desire to produce outstanding returns. Yet, as staff members focus on development areas and improve, so should overall results.
Employee Engagement is Manageable
We heard about a study that showed employee engagement can be positively influenced by line of sight and empowerment. While oversimplified, a key element is an employee’s connection to the mission and their ability to influence results with appropriate decision making authority. When there is a market-based compensation system the need for a “learning environment” as well as a performance assessment system should focus on an individual’s effort.
When we speak to investment managers, we find there's a low level of engagement when there is only a market-based compensation system and that they are most "engaged" when talking about career progression. This underlines the need for the endowment organization to provide an environment where staff members can learn, as well as a good assessment system that can let them know how they are performing.
It all comes back to the feedback loop - encourage the staff member, see how they are performing and let them know the result. The outcome will be greater return on your investment!