Eagle Talk

Certain Principles are Always Important

Dear Friends,

It is with great pleasure that this issue of Eagle Talk has been penned and written by an outstanding leader. I think you will findwhat he has to say focuses on all that I believe is key in under-standing today’s business environment.  Mike was one of my first clients, and in addition, has been a great friend over the years.

—Bob



 MICHAEL DOBSON
After graduating in 1973 from Trinity College, Cambridge, with a degree in Modern Languages, Michael Dobson joined the merchant bank, Morgan Grenfell, initially as an equity research analyst before moving into portfolio management. He held various positions at Morgan Grenfell including Head of the US and Head of Asset Management, before becoming Deputy Chief Executive in 1988, and Chief Executive in 1989.
 
Following Deutsche Bank’s acquisition of Morgan Grenfell in 1990, he was responsible for the bank’s Global Investment Banking business from 1993, joining the Board of Managing Directors of Deutsche Bank in 1996, as only the second non-German ever to be appointed to the Board. In 1998, he took responsibility for Deutsche Bank’s Global Asset Management business.
 
He left Deutsche Bank in 2000, and was the Founder and Chairman of Beaumont Capital Management, a hedge fund and high net worth asset management business. Beaumont was acquired by Schroders in November 2001. He was Chief Executive of Schroders plc from 2001-2016, and was appointed Chairman in April 2016.
 
He is currently a member of the Practitioner Panel of the FCA. Previous outside positions include Chairman of the Investment Board of the Cambridge University Endowment Fund, and a member of the Advisory Committee of the IMF Staff Retirement Plan. 

Forty years in business and working for four different organizations, from one of the world’s largest global banks, through medium sized merchant banks and asset management companies, to an investment boutique, has taught me that certain principles are always important, irrespective of the size or complexity of the organization or the time, where everyone has a tendency to think it is different now and past rules don’t apply. 

First and foremost, is the ability to think long term.  If you have that luxury it is an enormous advantage, being prepared not to be swayed by short term trends or pressures and indeed to use challenging markets as an opportunity to reconfirm your long term objectives when others are being pushed off course, for example investing in talent at a time when others are cutting costs.  For strong companies with a clear long term vision, difficult times should be welcomed as an opportunity to make market share gains.  But that needs good communication skills around where you are taking the company long term, and conviction that thinking long term is not an excuse for underperformance in the short term.

There are no short cuts to building a first class business and taking the time to grow organically is far more likely to build shareholder value over the long term than an acquisition led strategy.

Great execution is the most important part of any strategy.  In asset management you can find examples of successes and failures in every strategic segment of the industry from the largest passive players through to specialist hedge funds.  What that tells you is that great execution and a meticulous attention to detail outweighs strategic moves and reinforces the importance of continually seeking incremental improvement right across your business. 

There is no conflict between the interests of a company and its shareholders on the one hand and the interests of clients, because only by having a relentless focus on serving clients well can you build a successful business in the long term.  Putting clients first is therefore an act of enlightened self interest. 

There is always a temptation to compromise on people, over-rewarding average or even below average achievement or tolerating destructive behaviour because the individual is considered to be key to the business and concerns around loss of momentum were he or she to leave.  We have all made these compromises and it is always wrong to do so.  When the situation finally corrects itself with negative personalities leaving, there is a sigh of relief, a pick up in energy and a recognition that it should have been done sooner.  The problems in the investment banking industry stem from these cultural failings where negative behaviour was tolerated and regulators are quite right to be focusing on culture as a key part of avoiding a repeat of past mistakes. 

Today, individuals seeking to build a career in financial services generally want to specialise in a relatively narrow field where they can create a strong personal franchise, independent of the firm for which they work.  In the past, people saw building a broad experience base as a good way to progress and were therefore prepared to take the risk of trying new things.
Some of the management shortcomings in financial services can be attributed to this lack of broad experience amongst senior managers and companies are not taking the right measures to address this, too often filling management vacancies with external hires because they do not want to take a risk on a lack of experience or track record in a specific role, while they are prepared to take a risk on culture and character. 

I would prefer to take the risk that smart people with the right values can learn new skills, broadening their experience base in the meantime, than always turning to a new solution from outside where even a 50% hit rate in terms of a successful hiring experience could be considered a good result.
One of the things I have learned is that things never turn out as well or as badly as you think, which is both good news and bad news.  Problems that you think at the time are virtually insurmountable often pale into insignificance with the benefit of hindsight and equally hockey stick business plan projections never turn out as well as people would have you believe.

Good communications skills are vital for any leader and there is no better way than face to face where one always learns far more from meeting directly with someone than from any number of emails or telephone calls.  It amazes me how people prefer to email than talk directly and how careless people are in putting things in writing, particularly via email.  We have seen the inadvisability of that in some of the spoof emails that have recently been circulating in London and New York.  Finally, do take things personally.  Business is a serious business and only people who really care are going to be successful.

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