What is more important to your fund’s success? The portfolio of investments or the portfolio of people? To create a successful hedge fund, it is tempting to solely focus on the investment side. However, ignoring the significance of the people side of the business is not sustainable or effective. The PEOPLE create and follow the portfolio investment process to achieve success.
While a fund is comprised of a portfolio of investments, it is the portfolio of people who are the underlying force behind the results of those investments. The success of the firm is therefore first dependent on the quality of its investment in its people. Here are our top recommendations for creating a fail-proof “investment in people” process.
It is vital to hire a talented team for your fund. A firm cannot manage itself and without fitting talented people in the right roles, your hedge fund will simply not thrive. Attracting the best talent makes your firm competitive.
Depending on the maturity of the firm, this is a shared responsibility. Yet, the primary responsibility falls into the hands of the Portfolio Manager. Let’s take a look at some aspects you’ll have to consider when building your human capital.
1. Talent Acquisition: The talent acquisition process is the most critical area you can focus on to set your firm up for success. Getting the right people on your team in the right roles will make the other aspects of managing the firm both more efficient and effective. To identify the missing roles your firm needs to drive your investments toward success you must first understand what types of skills and talents will be successful in those roles. Carefully conduct a gap analysis to clarify the missing skills at your firm. Then prepare a concise and clear job description. Brainstorm on the best sources for the particular role. Be prepared to sell the firm to interested candidates. Design an interview process so that all those who conduct interviews do so in a consistent and high-quality manner. Create a scoring system for applicants. Assign a project to candidates who make it to the final round to see if they can effectively do the high-quality work that will be expected of them. Of course, get references to uncover any strengths and weaknesses that haven’t been previously identified in the process. Consider testing for both technical and soft skills such as EQ, work ethic, integrity, etc. Finally, be prepared to make a competitive offer so you don’t lose them to your competition.
2. Train: Set your new hires up for success by investing the time and energy into training and development. You want to make sure your employees have all the resources they need to be successful and fulfilled at your firm. This includes in-depth training on the firm’s processes, as well as constant development of their technical and soft skills. The hallmark of a talented leader is their ability to develop the team such that they are trained to lead projects and manage others. Be a leader for whom people want to work for by imparting your skills and experiences on the people you hire. Watch them grow into valuable teammates that you can trust to progress your firm.
3. Communicate: Consistent and constructive feedback is essential for retaining and improving your team. Communication is a 2-way street so keep the lanes open by being receptive to hearing problems and concerns. Providing regular availability and feedback will ensure communication remains open with your employees.
4. Measure: You can’t manage what you don’t measure. Document feedback such that it is clear that this is a formal process to be taken seriously. Ensure that there is a criteria-based scoring system for both technical and soft skills so that employees are measured on a consistent basis. Include the score on an employee’s performance review. This score gives them a concrete view of their performance and a clear goal. Getting everyone on the same page happens when expectations are identified. Instilling objective measurement for those expectations provides the clarity that talented teammates crave.
5. Incentivize: Competitive compensation is essential for employee retention. Creating incentives monetarily and non-monetarily is a way to motivate employees to do their best work. High-quality talent responds to a reward-driven culture. Get your team to perform at a higher level of standards with rewards. Use measurement to help them make the connection between the rewards of specific outcomes. Don’t forget to provide non-monetary incentives and get creative to differentiate your firm from the competition. Often, the most driven people want professional opportunities or perks.
6. Retain/Terminate: For the sake of the firm and all those involved, you should be terminating employees who don’t add enough value. It’s not beneficial to anyone, including the employee in question, when you retain someone that isn’t performing. It not only hurts the business, but it is demoralizing to the talented teammates in the organization who hold themselves to higher standards. Terminations should be handled with fairness and compassion. Do your best to assist employees in the transition to the next stage of their career. Never burn a bridge.
The Bottom Line
While a fund comprises a portfolio of investments, it is the portfolio of people who are the underlying force behind the results of those investments. Focus first on creating a winning portfolio of people. Investing the time to design a high-quality Human Resources process will pay dividends in every area of your firm for years to come. We encourage you to take your practice a step further by signing up for Arootah’s Executive Coaching. Also, contact us to learn more about our Business Advisory services for designing a high-quality Talent Acquisition Process.
What questions do you have on the talent process? Let us know in the comments below!