This article was excerpted from OPEN Book: Leadership. Find more information and resources from OPEN at openforum.com/leadership.
There aren’t many asset management companies with an average advisory client retention rate of 98 percent. There are still fewer with an average staff tenure of 13 years. But then again, the San Francisco Bay area-based Bailard isn’t a standard investment company. “We’ve always tried to deal with clients honestly; we’ve always figured we are their ally,” says the company’s chairman, Tom Bailard. “And, from the very beginning, we have always had a focus on doing the right thing. Being successful human beings was just as, if not more, important to us than being successful businessmen.”
This outlook – unusual in the highly competitive milieu of the financial industry, as Bailard acknowledges – has proved fruitful. Last year, the company was selected as one of the country’s Top Small Workplaces by The Wall Street Journal and Winning Workplaces. At a time of economic turmoil, it held on to its 49 employees and sustained an annual revenue of $12 million. Loyalty – of clients and employees – is heavily imprinted in the firm’s DNA. “We have what I call a ‘high trust’ culture,” says Bailard. “That means we aim to create an environment of open communication and integrity, and we also have a strong belief in employee development.”
The company’s ethos was established with its inception in 1969, when Tom Bailard and his two cofounders met at Stanford Business School. Deciding that they wanted to work for themselves – “that idea resonated with me,” says Bailard, “as I come from a farming family” – set the company up as one of the country’s first fee-only financial planning practices (the firm offers Wealth Management, Institutional Equity Strategies, and Alternative Investments). That said, Bailard insists they had no grand plan. “I have this phrase to describe it: a project without a road map,” he says, laughing. “We sort of backed into it. But at the same time, we knew we wanted to be sensitive to externalities, to the marketplace, to what our customer needed. We felt that if we put clients’ interests first, that would serve us well in the long run.” The wisdom of that decision is evident in the fact that Bailard is still here, four decades later; as Bailard says, “not many firms stick around that long in what is a very competitive industry.”
Bailard’s passions, he says, are family, business and community, and his firm is an amalgam of all three. This informs his criteria for hiring people. “I personally believe that you get better work from people if you lean toward encouraging them to act independently,” he says. “As a boss, you’re always navigating between exerting control and letting people find their way. I always err on the side of letting them have a lot of autonomy. People who like a highly structured, top-down kind of environment don’t really thrive with us.”
On the other hand, Bailard’s familial atmosphere fosters an employee loyalty that’s not only unusual in their sector but, according to Bailard, vital. “I used to maintain, and I don’t think it’s changed, that you have to practice as an investment manager for at least 10 years before you get really good,” he says. “So we want to cultivate our employees for at least that long and beyond. And the other half of our covenant, responsive client relations, benefits from that longevity; we have manager-client relationships that have spanned 20 to 25 years in an area where people find continuity important and reassuring.”
As CEO, Bailard personally oversaw the transition of the firm from a founder/owner model to a management model in the late 80s when his founding partners retired; but for all practical purposes, the company had been following a horizontal rather than vertical style from the beginning. There is little sense of hierarchy at the company, and “transparency” is a watchword, both figuratively and literally; offices don’t have doors, and glass partitions allow unimpeded sight lines across the entire office as a way of encouraging conversations between employees and to deter secrecy; an attempt, says Bailiard, to eliminate the perpetual conflict in the finance industry, “between an employee’s desire to do well and the desire to do good.”
Even salaries, often a primary source of intracompany dissension, are no secret; if an employee wants to know the compensation of any other employee, including Tom Bailard, they can simply ask the chief financial officer. “I’ve had people close to the firm saying that this was one of the most peculiar things they’ve ever encountered,” says Bailard. ?“But I put it in place 30 years ago, and I’ve never regretted it. As a manager, if you know that your compensation decisions are essentially going to be public, you have to have pretty strong convictions about any decision you make. It engenders accountability on all sides; it’s like saying to employees, we’re not afraid to trust you with this information, and by implication you’ll learn to trust us.”
Bailard believes that such transparency can help to stifle office politics – a motive that he laughingly concedes is not entirely selfless. “I was interviewing a young fellow with a nice job in a big company,” he says, “and I asked him why he wanted to come to us. He said ‘Well, my current setup is 50 percent work and 50 percent politics.’ I thought, wow, if I could just cut the politics out, then I would double his productivity.” As in most areas of business life, Bailard has a motto to illustrate his approach: “I say that when you come to a firm, you bring the part of you that’s a machine, and the part that has a soul. The money is for the machine; it will tell you how valuable your machine-role is to the company. But if you want to know how you’re valued as a human being, then look to how ?you are treated.”
Bailard, the company, has other strategies to maintain its familial atmosphere. Each Monday morning, the staff gathers for “the 9:05,” where they discuss company news and current projects and introduce new employees. “The 9:05 gets different departments swapping ideas and facilitates collaborative effort,” says Bailard. Birthdays and employee tenure are celebrated, and the company holds an annual Oasis night (named after the college bar where the company’s founding principles were formulated on a napkin), during which four internally nominated employees are presented with ?Oasis awards for outstanding work.
All of which left Bailard singularly well-equipped to navigate the recent downturn. The company endured the same roller-coaster ride as its peers – assets and revenues going down, but workload going up – but deployed what Bailard calls a “quaint” solution: “Rather than layoffs, everyone took pay cuts, which were graduated according to seniority,” he says. “The senior people have to hold themselves accountable when necessary, and that in turn builds respect for leadership. Take employees for granted in bad times, and they’ll flee on the upturn. That’s a rather shortsighted approach.” Tom Bailard is living proof of his company’s success in investing in its employees’ longevity – after 40 years, he’s slowly and reluctantly relinquishing the reins of the company that bears his name (a new CEO, Peter Hill, was appointed in 2008). “When it comes to retirement, I like to quote a great line from an old friend of mine,” he says. “I won’t miss the rat race, but I will miss the rats. But,” he continues with some pride, “I have the satisfaction of knowing that, because of the way we’ve run the company all these years, and the way we’ve painstakingly developed and nurtured people, it’ll be left in the safest possible hands.”
For more information on Bailard Inc. visit Bailard.com or view their business profile in the OPEN Forum Connectodex.