Does the top management team make a difference to the performance of a company?
When I am asked to evaluate a company, whether by a management team or an equity partner for investment, my attention goes straight to the management team. It reveals the true value for any business.
This is contrary to the first action taken by most investors who focus on the balance sheet and other quantitative measures, but my experience teaches that sustained results come from having a top-quality top management team in place.
This approach reveals the distinction between the "potential oriented investor" and a "balance sheet investor". Obviously, a balance sheet investor pays attention to a business's balance sheet, cash flow, future economic climate, operating data, and markets for the products and service. Most likely the balance sheet investor does realise that it is important for a company to have a good management team, but too little attention is paid to evaluating management because it is perceived to be difficult to do.
By contrast, potential oriented investors know the top management team is the bones of the business so they give their primary attention to evaluating the management team. No matter how good the numbers are, if the management team has a flawed quality, then the sustainability of the business could be in question.
Since the top management team is central to value creation for a business, the fundamental question is: what are the characteristics, features, or attributes of effectively functioning teams?
While no team is identical, for the investor, owner, or member of a top management team there are some issues you should focus on. Here are some of the core components found in the best top management teams:
Vision:senior leadership gives employees a clear picture of the direction the company is headed and obtains "buy-in" of the employees.
Results:senior leadership consistently delivers expected results and meets customer expectations.
People orientation:senior leadership demonstrates that employees are important to the success of the company.
Quality commitment:senior leadership relentlessly measures and strives for improved quality to customers, partners and stakeholders.
Confidence:employees and stakeholders have confidence in the company's senior leaders.
Primerica, a provider of financial solutions for the middle market largely through life insurance, illustrates some of these points. The company was started in 1977 by a former high school football coach, Art Williams.
Over the years, his company grew until being acquired by Travelersand eventually merging with Citibank in 1998. Primerica last year was separated from Citi via an initial public offering, and I am optimistic about its future because the original top management team is still in place.
It just so happens that I follow the national sales director, Larry Weidel, on Twitter. Below is a sample of his tweets. You will notice they are conspicuously different from what you might expect to read from a sales leader. Instead of focusing on the numbers and pressuring for sales, Mr Weidel focuses on people and potential:
You can't push people who don't want to be pushed.
What's the hottest part of a flame? The blue. That's how hot you and your team need to be all the time if you are going to win.
Until your friends tell you that you are working too hard, you aren't working. Most people think they are working, but they are coasting.
You have to fight for people's attention, Be interesting. Be compelling. Boring doesn't work.
Tommy Weir is an authority on fast growth and emerging-market leadership, author of The CEO Shift and the managing director of the Emerging Markets Leadership Center
business@thenational.ae
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Abu Dhabi Desert Challenge – Rally schedule:
Saturday: Super Special Spectator Stage – Yas Marina Circuit – start 3.30pm.
Sunday: Yas Marina Circuit Stage 1 (276.01km)
Monday: Nissan Stage 2 (287.92km)
Tuesday: Al Ain Water Stage 3 (281.38km)
Wednesday: ADNOC Stage 4 (244.49km)
Thursday: Abu Dhabi Aviation Stage 5 (218.57km) Finish: Yas Marina Circuit – 4.30pm.
Terminator: Dark Fate
Director: Tim Miller
Starring: Arnold Schwarzenegger, Linda Hamilton, Mackenzie Davis
Rating: 3/5
Formula Middle East Calendar (Formula Regional and Formula 4)
Round 1: January 17-19, Yas Marina Circuit – Abu Dhabi
Round 2: January 22-23, Yas Marina Circuit – Abu Dhabi
Round 3: February 7-9, Dubai Autodrome – Dubai
Round 4: February 14-16, Yas Marina Circuit – Abu Dhabi
Round 5: February 25-27, Jeddah Corniche Circuit – Saudi Arabia
Company info
Company name: Entrupy
Co-founders: Vidyuth Srinivasan, co-founder/chief executive, Ashlesh Sharma, co-founder/chief technology officer, Lakshmi Subramanian, co-founder/chief scientist
Based: New York, New York
Sector/About: Entrupy is a hardware-enabled SaaS company whose mission is to protect businesses, borders and consumers from transactions involving counterfeit goods.
Initial investment/Investors: Entrupy secured a $2.6m Series A funding round in 2017. The round was led by Tokyo-based Digital Garage and Daiwa Securities Group's jointly established venture arm, DG Lab Fund I Investment Limited Partnership, along with Zach Coelius.
Total customers: Entrupy’s customers include hundreds of secondary resellers, marketplaces and other retail organisations around the world. They are also testing with shipping companies as well as customs agencies to stop fake items from reaching the market in the first place.
The specs
AT4 Ultimate, as tested
Engine: 6.2-litre V8
Power: 420hp
Torque: 623Nm
Transmission: 10-speed automatic
Price: From Dh330,800 (Elevation: Dh236,400; AT4: Dh286,800; Denali: Dh345,800)
On sale: Now
ULTRA PROCESSED FOODS
- Carbonated drinks, sweet or savoury packaged snacks, confectionery, mass-produced packaged breads and buns
- margarines and spreads; cookies, biscuits, pastries, cakes, and cake mixes, breakfast cereals, cereal and energy bars;
- energy drinks, milk drinks, fruit yoghurts and fruit drinks, cocoa drinks, meat and chicken extracts and instant sauces
- infant formulas and follow-on milks, health and slimming products such as powdered or fortified meal and dish substitutes,
- many ready-to-heat products including pre-prepared pies and pasta and pizza dishes, poultry and fish nuggets and sticks, sausages, burgers, hot dogs, and other reconstituted meat products, powdered and packaged instant soups, noodles and desserts.
