Organization – Process – People

February 2, 2010

The last two chapter of ‘Pioneering Portfolio Management’ conveyed a clear message, one of a recurring theme of Swanson’s idea, which is a relentless emphasis of Process Process Process! The structure of an organization defined the its behavior and behavior of its people, and henceforth determines the characters and performance. Swanson outlined in his book his ideal investment management organization:

1) Investment Committee

  • diversified
  • judgment over professional qualification
  • goal is to manage the process not the investment portfolio

This is similar to emphasize policy portfolio and asset allocation over tactical decision making and market timing. As the investment committee suppose to oversee the higher order attributes of the organization.

2) Investment stuff

  • encourage honesty guarantees disclosure
  • disciplined process, coherent intellectual framework guards against informal casual decision
  • scheduled meeting institutionalize the decision process. Written memo encourage logical thorough thinking over oral discussion
  • guard against group dynamics, limit consensus building in the process, encourage independent thinking and contrarian view. provide supportive environment for loner (this is much more like a university department than a corporate)
  • constantly renewal of young professional, train through apprenticeship is much more effective than outside hiring or seek training through academic program

3) Organizational character

  • high quality people are attracted to cutting edge issues, embrace global strategy and focus on mentorship
  • operates on the PERIPHERY of standard institutional norm
  • aware of the fact that standard selection process exclude interesting manager. embrace non-standard approach
  • aware of the fact that conventional unimaginative bureaucracy ensure poor result.
  • avoid assigning blame, encourage discussion of failure opening (by emphasizing the process over individual decision)

4) Decision making Challenge

  • misalignment of interest between individual and institution, between agency and principal.
  • fear, seek of instant gratification, peer pressure
  • contrarian pitfall ( NYU too far away from norm, Boston U too concentrated, strike the right balance is the name of the art).

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