Alpha Waves - October 07

Secret Diary of a Chief Executive

Each month Peter Blank, the CEO of PREMIER Asset Management, provides Magnus Spence with his secret diary, and Magnus then goes on to publish the best bits in "The Fund Business" Magazine. If this seems a bit indiscreet, please be reassured that it's all absolutely above board. This is a reprint of the first instalment, written shortly after Blank's appointment in 2006.

"What have I done? What HAVE I done? Not long ago I was a perfectly happy divisional head here at PREMIER Asset Management, meeting my challenges with some ease. Now, since Christmas, I am head of the whole caboodle. CEO Europe and Middle East, to be precise. And it is an utter, UTTER, nightmare.

I am sitting in my pyjamas, trying to prepare for my first senior management offsite tomorrow. I have decided to launch a new initiative, and am calling it “Deep Retail”. More on this plan later. Needless to say this strategic initiative is vital for our future success. But for now, let me explain how hard it is to get a strategic initiative off the ground at this shop.

The PREMIER grandes fromages cleverly sold me this job last year with an alluring description. “Running a business is easy – it’s like running an investment portfolio”, I was told. “Allocate your resources as you would share classes and regions, and carefully pick people, as you would stocks”.

Whey-hey! How easy is that! I imagined I would quickly become an urbane and dashing Peter Lynch-style leader, making insightful and decisive strategic bets, surrounded by acolytes gasping at my wisdom and courage. An Alpha leader chasing alpha performance in an alpha business.

But it was only a matter of days before the more prosaic omega truth dawned. I was once taught that leadership was about thinking through and then implementing strategy. Now I can see that this sort of nonsense comes from people who have never led anything. I don’t get time for thinking about strategic issues. I am pulled from meeting to meeting by my reports and their reports, each of them asking for more of my energy and input. Far from gasping at my wisdom, I hardly get a word in edgeways, as my former friends bark their demands at me.

I have so much in my head, it hurts. I have calculated that I am responsible for 68 aspects of the business, and possibly 70 if you were to include: planning the Christmas party (11 months away); and mending the broken lift, on both of which lowly subjects I was expected to have a view at a meeting before breakfast this morning.

There is a Peter principle at work. My Peter Lynch fantasy of alpha manager-dom has dissolved, replaced by the ‘Peter Young nightmare’. In this dream, I am the cross-dressing sap from Morgan Grenfell, hitching up my skirts and helplessly squealing my displeasure at the mob pursuing me. Last night I woke up shouting, apparently, sweat pouring from every pore. I had to explain who Peter Young was to my wife, and she has been giving me funny looks ever since.

Needless to say I haven’t admitted any of this to anyone. Partly because, since Christmas, no one seems to listen to me anyway. But it is very nice to open up now, in this top secret diary, which I am assured will never see the light of day. I plan to reveal all on these pages in the coming months, to track my progress in making progress, as it were. 

As an army of one, facing what seems like a huge Mongol horde of (at last count) 748 employees, I have decided to pick my battles. Conserve my sparse resources. And the first battle will be the aforementioned “Deep Retail”. This has been a pet topic of mine for some time, and I know that the board are with me on it. Well over half of them seemed to understand what I was on about at the first board meeting last week. Well, maybe a third.

Explaining ‘Deep Retail’ requires a bit of history. A long, long time ago – 2002 in fact - we were urged by my predecessor Barry (May he rest in peace) to focus all of our European fund-selling energies on as small a number of distributors as possible. Where we had previously (and very expensively) built relationships with nearly 2,000 distributors across Europe, Barry now had us shift to focus on a list of just 180, who were apparently the ‘important ones’.

Barry, you see, had been to one too many meetings at the investment bank, where they swore that their monster profits arose from refusing to deal with all except 80 (or some other ludicrously low number) out of all global corporates. What works for the investment bank does not necessarily work for us. But dear old Barry was immensely impressed (over-awed) by the millionaire boffins over the road, and came back with the now notorious FOCUS OR DIE speech at a 2003 sales meeting in Brussels, still imitated to this day at every Christmas party.

What FOCUS OR DIE turned out to mean was that if we in the Distribution team didn’t FOCUS our sales channels, then we personally would DIE because Barry would kill us. And at this point in his speech he waved a golf club, smiling like Hannibal Lecter. As leadership presentations go, it was way up there with some of Darth Vadar’s better talks.
The small cluster of distributors that we then so obediently focused on, turned out to be the most horrendously painful clients. Knowing very well that they were “the important ones”, these big banks and other assorted pirates across Europe have subsequently held us to ransom.

They had us firstly on fees. We were having to give away so much of our fee to one Italian bank that if we had been using the profit driven remuneration structure that is now in place for paying bonuses to our sales team, the Italian team would not only have received no bonuses, they would probably have been writing personal cheques to the company once a month instead of receiving a salary slip.

But the distributors really turned the screws on follow-up service demands. For example, they tended to think that they could order around even our most petulant fund managers. We all remember well when our then star fund manager had to be dragged kicking from his bed and forcibly dressed by a team from marketing, all in order to represent the PREMIER message in a seminar organised by one of our clients - the notoriously demanding Hapsburg Bank - in a particularly small town in Switzerland.
So, my first task is to cut this Gordian knot.

My message tomorrow will be that we have to spread our wings, and make friends again with some of the smaller distributors who we turned our backs on in Barry’s day. In some cases this will be tricky. I myself remember telling one Austrian Bank that we were no longer interested in “small fry” like them, and I don’t envy the poor soul who has to try to win that account back.

Deep retail is one thing, but obviously (obviously!) we won’t be diving so deep in this sea that we will have to encounter the slimy mud-dwelling IFAs. This is one client group we never want to see again, particularly in Germany.

But there is headway to be made among the smaller and regional banks. I see a bright new distribution future beckoning. The shift to “Deep Retail” will at a stroke restore our margins, cut our costs, and add to our volumes.

I feel better already. Maybe taking on this job was not such a bad idea after all. Before retiring to bed I have looked in the mirror, and could swear that when the light is dim, and I hold my head in one particular angle, that there is a slight Peter Lynch look about me, after all. "

Magnus Spence 2007

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