‘People are our greatest asset’ is one of those clichés that chief executives repeat at conferences or in the annual report but, more often than not, don’t really believe. For many companies, though, their assets really are in the heads of the people who work for them. In financial services the knowledge and, as importantly, the relationships the employees develop critical to the firm’s success. Traditionally, asset-stripping took place once a firm was bought by a competitor or corporate raider. Nowadays, a company can be asset-stripped by headhunters before it is even sold. The loss of key players can take millions of a firm’s value.
The latest company to fall victim to a flight of talent is the fund manager Gartmore. The departure of a star fund manager, closely followed by two of his colleages, has thrown the firm into turmoil. As the Wall Street Journal put it, Gartmore’s value walked out the door. On hearing the news, investors fled. The firm was put up for sale on Tuesday as its CEO said that recent events had exceeded all his nightmares.
Given that managing risk is such an important part of any financial services business, I’m often surprised by their lack of contingency plans for when people leave. Assessing the risk posed by the departure of key employees and hedging that risk would seem like a natural thing to do. Of course, like everything to do with managing people, this is easier said than done. Gartmore, it seems, had started to prepare for the potential departure of Roger Guy. He had already reduced the funds that he was managing and had handed many assets over to a new team. But, according to the FT, despite these measures, many in the industry did not believe the handover would be smooth and questioned Gartmore’s ability to withstand the departure of a high-profile manager like Mr Guy. This comment from the head of research at Hargreaves Lansdown is telling:
With him gone it’s not going to be the same at all.
In some teams, there are pivotal people, not always the most senior ones, who seem to carry the culture with them and somehow embody what the team is about. Even if they hand over much of their work, the fact that they still appear in the office every day inspires people. When they leave an organisation it can set off a chain reaction, as others suddenly realise there is life outside the team. As I said of one former colleague, it’s almost as if he kicked over the dominoes when he left.
It sounds as though Roger Guy might have been such a person. As an employer, it is extremely difficult to insure yourself against someone held in such high regard, by investors and staff, walking away and leaving you in the lurch.
That said, no organisation should allow itself to become too dependent on a small number of employees. Hedging against the risk posed to the business by a sudden flight of human capital should be a priority for all executive teams. Where knowledge and relationships are the firm’s major source of competitive advantage, the loss of key people can mean the loss of the entire business. For many companies, people really are their greatest assets. CEOs need to manage those assets like they mean it.