To help investment organizations improve, I assist them in finding and closing gaps of various kinds — in how they are structured, how they make decisions, and how they communicate with others. The gaps can be subtle, but many of them are readily apparent if you look carefully. Some are even immediately obvious.
Any organization has gaps between what it says it does and what it actually does. Some are mere cracks, small and relatively unimportant, while others are veritable canyons, destined to cause major problems over time.
To take one area, consider the investment process of an asset manager. There is the marketing version of process and the actual process. The former is nicely summarized with some neat graphics and polished paragraphs. The latter is a product of the real world — of changing markets and organizations made of people. The two are not the same. (Consistent and repeatable? Hah!the research puzzle | This is a posting of mine about that phrase.)
Because of the need to summarize investment process in order to communicate with prospective and current clients, a characterization is put in place on Day One that doesn’t adequately encapsulate the real process. So, a gap exists from the start and it can easily grow over time; the real process and the marketing version of it can move at different times and even in different directions.
That gap might go unnoticed for quite some time, but it is dangerous nonetheless. It falls into the category of “will cost you business” — either because someone doing due diligence recognizes it in advance of investing or an existing client discovers the disconnect at a time when poor performance has them looking for an excuse.
There are many other kinds of gaps, of course. When the values statement posted on the wall of an organization seems out of sync with the behaviors being observed, there’s a problem. When the stated investment beliefs or philosophy are at odds with the available evidence of decisions made, there’s a problem. If people “talk long-term and act short-term,” there’s a problem. If you proclaim yourself to be different than other organizations but really aren’t, there’s a problem.
I recently came across a list of common impediments to organizational performance, as identified by Jeffrey Pfeffer and Robert Sutton in The Knowing-Doing Gap.Harvard Business School Press | I have not read the book. It was published in 1999. It is destructive:
~ When talk substitutes for action,
~ When memory is a substitute for thinking,the research puzzle | This fits with a recent posting of mine about “the sins of memory.”
~ When fear prevents acting on knowledge,
~ When measurement obstructs good judgment, and
~ When internal competition turns friends into enemies.
You can have incredible information resources, impressive people with stellar résumés, and operations around the world, but if all of that knowledge and experience doesn’t translate into productive action, what good is it?
Many investment organizations that seem to have everything are brought down by eternal problems of human interaction.
How easy is it to see those faults from the outside — or even to get a glimpse of them during a standard due diligence visit as they are commonly structured? It’s virtually impossible.
For organizations, a willingness to seek out the gaps and resolve them — one way or another, day after day — is critical. Those on the outside looking in need to start with the assumption that they exist and discover new ways to bring them to light.