At first, Andy Doyle couldn’t figure it out. The former chief human resources officer at the asset- management firm OppenheimerFunds was stumped by the fact that internal engagement-survey data showed that employees felt the organization had a good strategy and believed in senior leadership. Yet they also felt that the firm communicated its strategy poorly and wasn’t transparent about its plans. How could employees have faith in the organization and its leaders while simultaneously mistrusting what it was saying?
Doyle began diving deep into internal engagement- survey data a few years ago, when the asset- management industry writ large was at the peak of disruption. He convened a few focus groups with employees at all levels and in all divisions of the firm to find out. That’s when the answer hit him. “They understood everything we were saying, they just didn’t like what they were hearing,” he says.
Not a lot of asset managers like what they are hearing lately. Beating the industry benchmark by 2% doesn’t move the needle much anymore. Exchange-traded funds (ETFs)—which combine the diversification of a mutual fund with the low-cost trading benefits of a stock—and algorithmic trading can do that much faster, for cheaper, and in the frictionless way today’s consumers demand. As a result, management fees are shrinking, compressing profit margins for firms. At the same time, firms are pouring tens of billions of dollars into digital technology to lower costs and execute trades quicker; one millisecond could mean the difference between making and losing millions of dollars, after all.
All this is foreign territory for asset managers. For the last three decades, success was pretty simple: generate returns. And generating returns was pretty easy. Financial markets have been on a historic bull run, marching upward with little volatility, and the regulatory environment has been largely favorable until recently. With more money entering the market than ever before—global assets under management are at an all-time high of nearly $90 trillion, with industry profits about half that amount—those conditions created a windfall for asset managers. The fees generated literally built many of the largest asset-management firms in the world.
“In this kind of environment, where you have a maturing industry going through disruption, the formula for success is no longer clear,” says Chad Astmann, a senior client partner and global co-head of the Asset & Wealth Management practice at Korn Ferry. He says the industry’s leaders face a critical test. In order to evolve their business model to meet market pressure and consumer demands, leaders are going to have to execute a transformation plan that keeps talent fully engaged. “Ensuring employee engagement and discretionary energy behind the firm’s strategy and mission are at an all-time high is critical,” says Astmann. “Otherwise asset-management firms risk total employee disengagement.”