Lunch with Mimmi Kheddache-Jendeby, State Street Center for Applied Research, 7/2 2017
Some 25 lucky members of KvinnoKapital had the chance this week to once again meet Mimmi Kheddache-Jendeby and hear about the latest research that she and her colleagues at State Street’s Center for Applied Research have been up to. A former portfolio manager and manager selection expert, Mimmi’s grasp of the different “Greeks” that are widely used in investment management – alpha, beta, gamma, etc. – is a given. This time she was with us in order to introduce a new one, phi. What phi aims to add is a way for investors to quantify how their motivation will affect long-term investment returns. It has taken Mimmi and her colleagues 18 months of research, in-depth interviews with more than 200 global industry leaders and the findings from a survey of nearly 7,000 respondents to answer this question.
Apart from being the 21st letter in the Greek alphabet and thus appealing to investment professionals, we discovered that phi is also a smart acronym that stands for purpose, habits and incentives. What Mimmi proceeded to explain for us during lunch was why organizations that have a clear sense of purpose and manage to make a connection between this purpose and the habits that they encourage and incentives they offer should be able to perform better in any return environment.
We could all agree with Mimmi that the financial industry is full of highly motivated individuals and yet the industry happens to score extremely poorly when it comes to being in alignment with the employees fundamental values (12th out of 13 industries surveyed!). It turns out that it’s not the level but the type of motivation that is important. The majority of investment professionals claim that they are passionate about financial markets and yet only about a quarter of them say they are in the industry for the purpose of helping clients in achieving their financial goals. And guess what, passion without purpose doesn’t seem to lead to better performance. The phi motivation is distinctly different from the short-term outperformance motivation or asset-gathering focus imbedded in asset management.
Mimmi talked about the emotional pressure that is abundant in our industry, the skewed incentive systems in place (the cobra hunting regulation in India was a great example of how you can exacerbate a problem by a wrong incentive solution) and the difficulty in breaking up with habits.
The survey itself is definitely a recommended reading: http://www.statestreet.com/content/dam/statestreet/documents/Articles/CAR/CAR_Phi_Web_FINAL.pdf
The discussion afterwards led us to the inevitable (for the network) question about a possible gender aspect of the study’s conclusions. Mimmi was careful to point out that motivation is an equally important factor for both men and women and their performance. There are however other studies that seem to suggest that e.g. the banking industry fails to acknowledge women’s basic motivational needs for relatedness and competence which might explain its difficulty to attract and keep female talent. Kim, one of the younger members of the network, pointed out that purpose is extremely important for both young men and women and the industry stands to lose young people both as employees and as clients if it doesn’t shape up.
As for practical tips, Mimmi recommended the diagnostic tool that the team has developed in order to assess your organization’s phi score, awareness of a problem is always the first step to solving it. Our homework from the lunch meeting is of course to think about the questions she posed:
- Purpose. What motivates you to perform?
- Habits. Why do you continue to work in the investment management industry?
- Incentives. Do you think of your work as a job, a career or a calling?
Thanks everyone for your active participation and special thanks to AP3 for hosting the event and to State Street for contributing with lunch!