First person: Playing ball
Managing highly talented but egotistical individuals is a challenge both on and off the football pitch, says The Review columnist Anthony Hilton
An Arsenal season ticket holder who is a hedge fund manager – which you need to be to afford an Arsenal season ticket – was enthusing after one of his team’s better performances at how they had played together as a team. Too often, he said, this collection of brilliantly talented individuals, assembled from around the world at a cost of hundreds of millions of pounds, behaved as if they were alone on the pitch, the only ones who mattered and the only ones skillful enough to be given the ball. They did not pass even when a colleague was in a better position, they did not run to create space to make a colleague’s task easier, and they certainly did not lend support of cover to a colleague attempting a difficult tackle. As a result, potentially good opportunities were squandered and indifferent teams sometimes got the better of them.
It reminded him, he said, of life back at the office.
He had a point. A typical Premier League football team will have about 40 players in its squad and a further 40 to 60 support staff. A typical hedge fund, if one can make such a generalisation, will also have about 30 to 40 in the ‘squad’ who actually make the investments, and perhaps twice as many support staff who handle administration, compliance, reporting, valuation and all the other things that form part of a modern-day investment operation.
No one ever complains about the difficulty of managing the support staff – with the possible exception of Chelsea’s Jose Mourinho, who fell out spectacularly with the team’s doctor earlier this year. They do complain all the time, however, about the challenge of managing highly talented, creative people and getting them to perform to the best of their abilities.
This is not just a hedge fund and football team problem. The seeds are there in the challenge hospital administrators face in motivating consultants, while advertising agencies grapple with managing copywriters and newspaper bosses complain about organising journalists. Creative people tend to be mavericks; they are creative because they do things differently. A dislike of being told what to do comes with the territory.
It is hard to motivate and direct someone who walks in every morning with an ego the size of a planetIn most professions, the rogue behaviour is kept in check by economic necessity. Creatives curb their worst behaviour because of the need to stay employed and earn a living. But in hedge funds and football, where the incomes can be astronomic, this constraint is largely removed. This leaves management with very few tools. It is hard to motivate and direct someone who walks in every morning with an ego the size of a planet.
Yet it has to be done. The first thing to do is recognise that not all the stars are there to score goals. You need good defenders, you need someone to be analytical, you need a strategist and you need a leader. Most hedge fund managers would say their business would implode if they lost four or five key people, but these are not necessarily their goal scorers. Football managers, and certainly their supporters, take a similar view. Nevertheless, the whole edifice remains totally dependent on the whims – and motivation – of these key players.
Football managers usually employ a mixture of fear and bullying – which is why they rarely have sustained success. They might win one championship but not a second because, by then, the players have got used to the bullying and it no longer works. Or players are so scared of making a mistake that they lose the ability to use their talent. And it is the same in fund management. A stellar year is seldom repeated.
The alternative management strategy used by a handful is to win the stars’ respect by showing them that the manager knows more about the game than they do. This is the Arsenal approach. Unfortunately, this is a bit like a momentum trade: it thrives on success but does less well in adversity when the players begin to have doubts. This, again, can be said of a lot of hedge funds. Sustained performance comes only from the few who can combine bullying with psychology – Manchester United’s Sir Alex Ferguson being the prime example.
But there is another way – peer pressure leading to collective responsibility. Will Greenwood, the England centre alongside Mike Tindall in the England team that won the 2003 Rugby World Cup, says the genius of manager Sir Clive Woodward was to create a framework in which the players disciplined each other. He first created a buddy system where the players were made responsible for one teammate – often the one who was the main rival for their own position. At the same time, Woodward let the team set its own rules, as long as these were compatible with the objective of winning the cup. Thereafter, someone who broke a rule was letting down his buddy, and by extension the whole team. Misbehaving lost them the respect of their colleagues, so they stopped misbehaving.
The manager appeared to be out of the picture, but only because he was behind the team herding them, rather than standing in front of them telling them where to go. But this was an important difference: the team thought they were setting the goals, so they took responsibility for reaching them. Perhaps that’s a tactic that can be employed at the trading desk and beyond.
Look out for Anthony Hilton's First Person column in the December 2015 print edition of The Review.