We’ve identified four levels of change management interventions to boost performance: the individual, the team, process and culture. The quantitative and qualitative optimization methods applied at individual and team level are similar, for example establishing certain skills and rituals that are needed to get the job done well. Where there is low resistance, change can probably be effected without any external guidance. But given the potential personal and organizational tensions involved in medium- and higher resistance actions, this is not always the case.

Illustration B – Levels of Intervention
© Panthera Solutions

The less personal the aspect to be optimized in an investment process, the lower the organizational resistance. Therefore minimizing fees, optimizing tax structures, or implementing regulatory changes meets relatively little resistance. Increased organizational resistance becomes visible when we are dealing with asset allocation-related topics.

Culture and Process define the game arrangement of an investment process. The meaning of this can be described as follows: we all know that the more often one plays at a casino, the more likely it is that the house wins, even if a player can temporarily enjoy a lucky streak. A certain asymmetry in favor of the house is structurally embedded in the game. The very same is true for the game arrangement in an investment process. If a certain overachieving behavior of the individual decision-maker, say high work ethics, is expected, while the same standard is not set as part of the team or organizational culture, it only is a matter of time until the individual aligns his behavior to the established organizational culture or leaves the organization.

For example: if an employee is expected to openly experiment with new asset allocation methodologies, following an evidence-driven trial and error process, but the organization remains driven by a culture based on fear and therefore responds destructively to errors, it only is a matter of time before the employee either returns to the rituals that come with a fear-based culture or leaves the organization.

Conclusion

If professional managers of other people´s money want to position themselves as leaders in an investment management niche via innovation-driven competitive edge, it’s key to be aware of cognitive biases and organizational resistance, and to manage these pro-actively.