A California investment firm went from near ruin to managing over
In just one decade, a Southern California investment advisory firm went from the brink of ruin to overseeing $100.5 billion in assets as of September, up from $833 million in 2011.
The firm, WCM Investment Management, was nearly finished after a string of wrong-way bets on large-capitalization domestic growth stocks from 2005 to 2011. Its inexperienced managers favored Yahoo Inc. over Google LLC
GOOG,
; eBay Inc.
EBAY,
over Amazon.com Inc.
AMZN,
; and Nokia Corp.
NOKIA,
and Dell Technologies Inc.
DELL,
over Apple Inc.
AAPL,
Clients fled sending assets under management down to less than $900 million from about $4 billion in roughly five years.
Then, something happened that workplace experts say is uncommon for the world of money management. The firm’s top brass stuck by employees instead of firing them, and principal owners took the entire hit from lost income. At the center of the firm’s approach was the notion that corporate culture is the single most powerful determinant of long-term returns, and that a “toxic” workplace of finger-pointing, passing the blame, and dissent would only seal the firm’s fate.
“We don’t know many companies that would do what WCM did, by not immediately laying off its workforce on any kind of problem,” said Sue Bingham, lead author of the 2018 book “Creating the High Performance Work Place: It’s Not Complicated to Develop a Culture of Commitment.”
Through a rare mix of tragedy, second chances and a bit of luck, WCM’s management said the firm lived to fight another day by trusting young, portfolio managers to grow into their roles, shunning mass layoffs, and turning most employees into co-owners of the firm. The firm had already spent years cultivating a culture in which employees could thrive, and was choosing to stand by that approach during tough times. While WCM’s methods of operation remain unusual according to workplace experts, the firm’s methods may offer a way for employers to hold on to talent and reap rewards following the widespread “Great Resignation” by workers that has occurred during the pandemic.
“We were on our knees, but there was absolutely no point in blaming people for mistakes,” said Paul Black, the firm’s co-chief executive and one of four principal owners who bought out WCM’s founder, Darrell Winrich, for $200 million in the late 1990s. “All we did was say, ‘How do we get better?’ and `We’re going to fix our way out of this.’ From there, you create a vibrant culture in which people can thrive.”
The payoff was huge. The WCM Focused International Growth fund, now the firm’s biggest fund, with roughly $26.8 billion in assets, has outperformed its benchmark index for much of the past decade. It posted a one-year return of 29.5% during the pandemic,…
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