- The Empire Club of Canada Addresses (Toronto, Canada), 8 Apr 1999, p. 459-469
- Cheesbrough, Gordon F., Speaker
- Media Type
- Item Type
- Managing change. The speaker's decision to make the move to Altamira. Changes in the entire investment management industry. Transforming an entrepreneurial company from its original ownership structure into a team-based corporate structure without diminishing the unique qualities and spirit that drove Altamira's past success. How this was done. Pluses and minuses of Altamira. Revamping the organisational structure. Example of the need for reform. Equity Fund results. A more detailed examination of what Altamira did in the first six months to begin turning the company around. Then a phased programme of new product launches, strategic acquisitions and marketing the new direction. The e-business Fund. The ad campaign. Lessons learned. The very different company that is Altamira today.
- Date of Original
- 8 Apr 1999
- Language of Item
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- Full Text
- Gordon F. Cheesbrough, President and CEO, Altamira Management Ltd.
CHANGE MANAGEMENT VERSUS MANAGING CHANGE: THE ALTAMIRA STORY
Chairman: George L. Cooke, President, The Empire Club of Canada
Head Table Guests
Anne Libby, Owner, Libby's of Ontario Art Gallery and a Director, The Empire Club of Canada; Reverend Christopher King, Rector, Little Trinity Anglican Church; Anthony Wm. Harvey, Student, Editor-in-Chief of school newspaper, The City Adult Learning Centre; David A. Edmison, Director, Martin Lucas & Seagram, Independent Investment Counsel and a Past President, The Empire Club of Canada; Dale Blue, Managing Director, Chase Manhattan Bank of Canada; David Banks, Executive Chairman, Newcourt; Professor Roger Martin, Dean, Rotman School of Management, University of Toronto; Tony van Straubenzee, Partner, Russell Reynolds Associates and a Past President, The Empire Club of Canada; Edmund Eberts, President, RAPPORT Capital Formation Strategists; and C. Alexander Squires, Managing Partner, Brant Securities Ltd. and a Director, The Empire Club of Canada.
Introduction by George L. Cooke
I have the great pleasure of introducing as our guest speaker today, Gordon Cheesbrough, President and CEO of Altamira Management Limited. I can assure you he is a lot more than just another good-looking figure on TV commercials!
Altamira manages close to $5 billion in mutual fund assets and ranks as one of Canada's largest independent providers of mutual funds. The company manages money for mutual funds, pension funds, corporations and other major institutions.
Mr. Cheesbrough has more than 20 years of experience in the Canadian and international capital markets industry. In 1995, he assumed the position of Chairman and CEO of Scotia Capital Markets and ScotiaMcLeod Inc. He was also a member of the Executive Committee of ScotiaMcLeod Inc. and Chair of the Executive Committee of Scotia Capital Markets. Mr. Cheesbrough is credited for ScotiaMcLeod's industry-leading position in bond trading.
He joined McLeod Young Weir in 1974 and within six years became the company's youngest board member. Throughout his career, he has held a series of management positions including institutional bond sales, domestic and international bond sales and trading, as well as government and corporate finance and private client financial services.
An active member of the community, Mr. Cheesbrough sits on the Board of Governors of Upper Canada College and the Board of Trustees of the Community Foundation of Greater Toronto. He is also a Director of the Canadian Council of Christians and Jews and Governor of the Olympic Trust of Canada.
Gordon Cheesbrough earned a Bachelor of Arts in philosophy at the University of Toronto. He is married and has three children. Today Gordon will talk to us about "Change Management versus Managing Change: The Altamira Story."
Mr. Cheesbrough, welcome to The Empire Club of Canada.
Thank you. I'm delighted to be here. I have somewhat of a reputation for getting right down to business so I will do my best to live up to it today.
My speech is about managing change which is a natural topic for me to address these days. In fact, my wife Julie suggested we call the speech "Gord's Mid-Life Crisis." But I said that that would be too narrow a theme for the Empire Club, that we needed to broaden it to include Altamira, the financial services industry at large and human resource theory.
So now she's calling it "Gord's Very Big Mid-Life Crisis." It's been a busy year for me, to say the least. Let me start by telling you about my decision to make the move to Altamira.
I was 45 years old and had worked more than half my life for one company. When I joined McLeod Young Weir in 1974, the company and the investment industry were still a few years away from a major growth spurt. I had the privilege of helping the later-named Scotia McLeod develop into one of the powerhouses in the industry. But once you've tasted the experience of helping a company from the ground up grow larger, the desire to do it again never leaves you. It was time for me to move on to a new challenge.
For me, the company represented a real change--a chance to get back to the basics of building a team and managing growth. I saw Altamira as the most interesting and the most flexible platform for growth in the country.
Altamira was already one of the best known and most successful mutual fund companies in Canada. It had pioneered no-load and made it into a popular choice for investors. A noted industry watcher said in 1996 that the company had "taken Bay Street to Main Street."
In the fall of 1997, however, they had just resolved a difficult transition to new ownership and needed to regroup. Difficulties are not uncommon for 30-year-old companies like Altamira that are attempting to pass the torch to a new generation. In fact, there are firms such as TA Associates of Boston, that specialise in helping companies manage this transition successfully and freeing up the original capital in the business. The competing parties at Altamira eventually turned to TA, who then brokered a deal and bought a significant minority position in the company.
With the ownership issue behind them, Altamira was now hungry for change at a time when the entire investment management industry was going through profound transformation.
Mutual fund regulations were being rewritten. New market entrants were using e-business to leap-frog over traditional bricks and mortar branches, set up electronic distribution channels and put pressure on prices. Established players were beefing up their global capabilities through new alliances, mergers and acquisitions. Finally, consumers were demanding a more integrated approach to their entire wealth management needs and were looking for financial relationships that could deliver it.
So the challenge we faced in February 1998 was this: How can we transform an entrepreneurial company from its original ownership structure into a team-based corporate structure--without diminishing the unique qualities and spirit that drove Altamira's past success? The first thing we did was to take stock of the company's strengths and weaknesses. Here is what we found. On the plus side, Altamira had one of the smartest and most dynamic groups of people in the business. The bench strength was simply incredible--not just among the top portfolio managers but down through the ranks of research and support functions as well. They had been through a tough time and morale was low, yet there were amazingly few defections. Altamira's people were fiercely loyal to the company and committed to putting it back on top.
The company had unparalleled name recognition. It had a strong and loyal franchise.
It had an excellent reputation for direct-to-client services--independently confirmed by ranking agencies like Dalbar.
And it had a history of innovation:
• the first Canadian mutual fund company to go on the Internet;
• the first to offer services in Cantonese;
• the first to introduce plain English prospectuses; and
• the first to offer individualised statements of returns for unit-holders.
Altamira was the first mutual fund company to embrace the idea of communicating directly and extensively with its unit-holders--an idea that changed the face of the industry.
The new ownership structure was the key that unlocked this great potential. With its in-house bench strength of experience and strategic thinking, Altamira finally had the freedom and flexibility to make the changes that were required to meet evolving client needs and to move into the next stage of growth.
On the minus side, lagging performance in the Altamira Equity Fund was the number-one concern. The very fact that this was affecting the entire company was a symptom of other structural problems.
Two out of three areas of investment, namely international equities and fixed income, were doing very well. But with the Canadian equity fund representing 35 per cent of our mutual fund assets, there was a costly spillover effect.
The organisational structure needed to be revamped--again a common situation in an entrepreneurial company that had grown too fast. The challenge was to do so without losing the entrepreneurial spark that had made the company great.
The best example of the need for reform was the star system of portfolio management. If Altamira hadn't invented it, we certainly had put our name on it. We benefitted enormously from this system for the better part of a decade. But it was not the right direction for the future. One person cannot carry a company on his or her shoulders. The star system puts the company at risk if the star is incapacitated by illness. It inhibits team building. It hampers succession planning and expansion into new areas that require new skills. And it affects the morale of employees who live in the star's shadow.
Frank Mersch was Altamira's star for several years. But we had begun to build strong teams even before Frank left the company. His departure certainly added a sense of urgency to the project because we needed to restore confidence immediately in the Altamira Equity Fund and turn its performance around.
I'm pleased to say that we've made good progress on this critical front. The Equity Fund's results have beaten those of the TSE 300 for the past one, three and six months.
That's just for starters. During the same time frame, the Altamira Equity Fund outpaced every other Canadian equity fund in excess of a billion dollars in assets.
Now let's take a look at what we did in the first six months to begin turning this company around.
We'll start with Altamira's 14 portfolio managers. Each one of them is highly talented, and each one of them is highly competitive. And what I saw when I arrived was that much of that competitive drive was directed at each other.
It reminded me of the picture on our $50 bill--a circle of Mounties on horseback with their lances pointed inward. Well, ladies and gentlemen, as the new CEO I could easily picture myself at the centre of that circle. So I quickly called the managers together and told them that, from now on, we would be fighting the competition and not each other.
The result? Today, the lances are pointed in the right direction--and Altamira and I are feeling a whole lot better.
We began to communicate openly and often. Never again would our employees find out about important company news for the first time by reading it in the newspapers. If we wanted to build a team, we had to treat people as members of the team.
We chose the principles that we wanted to live by and we wrote them down:
Integrity. Client focus. Teamwork. Performance. Innovation.
We assigned some of our top equity experts--Ian Ainsworth, Sue Coleman and Shauna Sexsmith--to the Altamira Equity Fund.
For a company that managed risk every day in the markets, there was no formal risk management process. We tapped into the analytical abilities we already possessed in-house, put together a risk management committee and introduced individual and house limits.
We began weekly meetings for portfolio managers to share market information and develop new concepts for client service. In short, we started thinking about maximising our performance and service capabilities as a fund family, not just as individual funds.
We rebuilt the senior management team and clarified reporting relationships. We now have managing directors who report to me and I report to the board.
Straightforward, accountable, consistent. It's the only way to go.
Part of the new management discipline was to get a handle on media relations. This is not an easy thing to do at a company that had been a media darling for many years. But the darling had turned into the many-headed Hydra of ancient mythology.
And every head had a different story to tell. Reporters loved it; I didn't.
So we entered a period of 'radio silence' for a few months while we focused on customer research, structural changes, performance issues and forward planning. We began once again to make the story rather than to be the story. And when we turned on the microphones again, we did so with a strong and effective media relations policy in place.
We began to rebuild our relationships with clients, who had been patient but now wanted to see some action. What they wanted first and foremost was better performance in the Altamira Equity Fund. We set the wheels in motion in the spring and summer of last year, and by the fall the results were already impressive.
We spent a lot of time visiting clients, talking to them on the telephone, listening to what they wanted. And we made a simple commitment--that we would give them products and services that met their needs, not ours.
Let's fast-forward to September, 1998. We're in our new premises at the Exchange Tower. We begin a phased programme of new product launches, strategic acquisitions and marketing our new direction.
The Precision Index Funds launch was first. We looked at the product and decided there was an opportunity to give consumers a price break. The result was that the biggest player in index funds moved down to our price. It sent out a message that we were back in action, demonstrating leadership and turning heads again.
The move also helped us clarify our own pricing strategy. Simply stated, if a product or service is closer to a commodity, like index funds, we try to keep the price as low as possible. For valued-added products like actively managed funds, we ensure the fees are competitive.
Our acquisition of Mutual Fund Direct, which sells the funds of competing fund companies, was another example of a new confidence and maturity at Altamira. We decided that, since our portfolio managers already compete every day against indices and against other fund managers, then why not come up with a solution that gives our clients more choice and lets us benefit from this healthy competition.
The e-business Fund was classic Altamira.
It shook up the industry by being the first of its kind in Canada. We took our own in-house expertise in technology stocks and partnered it with the most knowledgeable and intuitive source on e-business available, namely Don Tapscott, Paul Woolner and the people at the Intelligent Enterprise Corporation. The result is a competitive advantage that will be very tough to beat.
We recently announced a group of Managed Portfolios for clients who want us to play a greater role in optimising their mix of different Altamira funds.
Finally, there is the ad campaign, or, as some might have it, the campaign that put new meaning behind the old saying: "Don't Give Up Your Day Job."
Now I'd like you to understand something about me. I like to keep a low profile. I like to let performance speak for itself. And I like to walk down the street in the comforting embrace of anonymity. So I can tell you that there was a lot of soul searching around the Cheesbrough kitchen table before we decided to take this step.
Why did we do it? Altamira needed to send out a message of real change, fundamental change, and a professional actor wouldn't get the job done.
So if there's anyone in this audience who might be thinking that it was just an ego trip, that there's a thrill in having your face recognised by millions of people in public--think again. It is not a step to be taken lightly, which is why I absolutely drew the line at the request for the 20/20 Interview with Barbara Walters. Instead, I've
decided to take the lampooning I received at the hands of "This Hour Has 22 Minutes" and let it stand as the apex of "Gord Cheesbrough's Fifteen Minutes of Fame."
That takes us to the end of an extremely eventful year. We experienced profound change and renewal as a company, all the while managing through one of the most difficult markets in several years.
What lessons did we learn?
One: Assume that every turnaround will be tougher than you think. You can never do enough due diligence to eliminate surprises.
Two: Listen carefully to what your employees are telling you and what your clients are telling you. And while you're at it, do some quantitative research to back your assumptions.
Three: Find the people quickly who are motivated to make changes, and turn them into your allies and your support network. That's not easy, especially when you've spent your entire previous career in one company, as I had. But it is fundamental to your ability to bring about change.
Four: Act swiftly and never deviate from your own value system. It will guide your judgment and will see you through almost any crisis.
Five: Have patience and a thick skin--especially about what you read in the papers. Some journalists see the glass in your hand as half empty and the rest will compare it to the gallon jug held by your competitor. That's their job. Ours is to make our clients wealthy. If we do it well, the rest will take care of itself.
And six: Communicate with your people regularly and openly. Loyalty is a two-way street that is paved with open, honest and frequent dialogue.
Altamira has come a long way in the past year. Morale is high. Performance has improved and the months of heavy redemptions are well behind us. In an RRSP season that was the toughest in years for all companies, we held our own and scored the third-highest increase in net sales over last year among all the mutual fund companies. We're a very different company today. We have maintained and grown one of the most admired pools of talent in the industry. And we are building a platform on which we can deliver solid performance across the full spectrum of our investment products.
Altamira is on the road back and we're picking up speed. If I had to pick the four most critical factors that will ensure we reach our long-term goals, they would be:
• Our focus on clients. We have a reputation for superior service and advice, and we will build on it.
• Our focus on performance. In our business, there is simply no substitute for performance.
• Our focus on teamwork. The team at the Stanley Cup is not the one with the biggest superstar, but the one with the deepest bench strength.
• Finally, our focus on attracting top people. We are known for being a great place to work, a place that rewards excellence and initiative, a place that breathes excitement. We aim to stay that way.
If we continue to do these four things well, then I will soon be able to happily announce--happily and forever after--that Gord's Mid-Life Crisis has been transformed into Altamira's Mid-Life Opportunity.
The appreciation of the meeting was expressed by C. Alexander Squires, Managing Partner, Brant Securities Ltd. and a Director, The Empire Club of Canada.