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Fighting the Downturn from the Top Line
Amidst the ongoing cost-cutting across the asset management industry, an old Harvard Business Review article provided me with a good reminder this week.
Leading Change from the Top Line presents an interview with Schering-Plough executive Fred Hassan and his strategy for turning around flagging businesses. Mr. Hassan's approach contains good food-for-thought for asset managers.
Unlike many of his peers, and, coincidentally, current asset management executives, Mr. Hassan prioritizes top-line growth to navigate difficult business environments. In other words, in tough times he focuses on motivating and investing in salespeople to foster a business turnaround. Three primary reasons:
- Product development cycles (in Mr. Hassan's business, and in ours) are too lengthy to immediately transform results.
- At some point, there are no more costs to cut. Cost management can help for a year or two, but top-line and market share growth do more to ensure long-run success.
- Salespeople most directly impact clients' moods. As their morale goes, so goes that of clients. And damaged or lost client relationships can take 6-18 months to repair.
That last point resonates most with me. Assuming the markets eventually recover, a motivated, positive salesforce can enable a firm to take advantage of that recovery ahead of the competition.
Of course, many asset managers face additional issues within the sales ranks. Specifically:
- Firms have already shed many wholesalers.
- The wholesalers that remain in place are not the happiest campers. Any loosening of the labor market will bring a lot of turnover along with it.
So where does this leave us? For firms to position sales to help lead themselves and their customers to greener pastures, I think firms need to take honest stock of three things:
- Sales Morale: If the market recovers later this year, how much turnover will we see? How much disruption will this turnover cause to our relationships and our business?
- Compensation Structure: Does our sales compensation model do enough to protect our sales professionals in down times and the firm when business is great? Or does it ensure drastic highs and lows that undermine the stability of the team?
- Team Structure: How can we inject or augment our use of hybrid wholesalers to expand our relationships with advisors and gather assets more cost-effectively?
It is vital that firms undertake these analyses now, not after things have turned for the better. By then, it'll be too late. Proactivity on all three fronts - morale, comp, team structure - will position firms to deliver on Mr. Hassan's tried-and-true strategy of using the sales team to lead business turnaround.