As the group chief executive of M&G Investments, the oldest and one of the largest retail fund managers in the UK, Michael McLintock knows about change management. After a career that started in asset management and corporate finance, he joined M&G in 1992 and was later appointed chief executive in 1997. During his nearly decade-long tenure, he not only enacted substantial organisational changes, but he also managed the sale of M&G to Prudential, one of the largest providers of financial services in Europe. And that was only the beginning.
Jason Chaffer, global practice leader of Spencer Stuart’s Financial Services Practice, had the opportunity to sit down with McLintock, someone who normally shuns the spotlight. During the conversation, McLintock shared his personal experiences on what it is to lead an organisation in an industry characterised by constant change.
Chaffer > What was the state of the business when you took over M&G?
McLintock > Today’s asset management industry is incredibly different from what it was in 1997. When I was appointed chief executive, M&G was a publicly quoted company that needed to be reinvigorated. Our numbers were not spectacular and, culturally, everything was looking a bit tired and stale. The overall perception was that we were moving from the fast lane into the slow lane. It was a wonderful challenge given the company’s tremendous historic strengths — a preeminent position in the retail market and a great reputation for long-term investment returns. But, as with any business that has lost its way a little, there was resistance to change.
Chaffer > Did you go in and “drive the agenda for change” or did you try to keep the more conservative factions happy?
McLintock > Organisational change often only occurs by breaking some eggs. Because my first priority was to get the right people in the positions of influence, I had to make some tough decisions that resulted in letting go of some people who had been fixtures in the organisation. This made having a clear mandate from the M&G board all the more crucial. The non-executive directors were keen to shake things up and were incredibly supportive.
I can’t overstate that point enough. I was only 36 years old when I was appointed chief executive — so hiring me was a risk from the board’s point of view. But they never flinched. We roughly defined the parameters we were going to work in and communicated regularly. The board understood that if you’re running a business, you have to be free to do what you think is right.
Chaffer > There’s been quite a bit of change at M&G since you took over the reins nine years ago.
McLintock > During my tenure we’ve gone through three distinct phases. Significant cultural change aptly describes my first two years, characterised by a great many personnel changes. We had been strong in the retail world; so, of course, everyone was targeting us. But if we had simply done nothing, we would have lost a huge number of customers. Externally and internally, we had to show that M&G had not gone to sleep and that good things were to come.
Looking back on those two intense years, dealing with the press is the main thing I would have handled differently. When I took on the job, we were under a press onslaught and I was far too sensitive. In hindsight, I should have turned the proverbial cheek. When you’re in that situation, recognise that what you’re doing is for the organisation’s long-term health. Whatever the press is saying on one particular day will be forgotten the next. And the people who read the press aren’t nearly as taken in by it as you imagine they are. If I had been less thin-skinned, I would have felt under less pressure.
Chaffer > What were the other phases for M&G?
McLintock > The acquisition by Prudential in 1999 marked the second phase. The prices we could get from a takeover offer made it difficult to ignore the value this would offer for shareholders when compared to anything we had any chance of delivering in a realistic timeframe. On top of that, a third of our equity was owned by a charitable trust and they made it clear that they would welcome the chance to divest. The combination of valuation and the desire to take our destiny into our own hands made it absolutely clear that this was the deal for us.
The third phase — the best phase — currently involves reaping the rewards of our work and delivering the best value to our clients.
Chaffer > M&G is known for being highly independent. How did you lead the organisation through the acquisition?
McLintock > Independence is at the absolute core of M&G. This is one reason why we kept our name. People in our industry want to work for a clearly identified, independent asset management business with a culture that is investment led. We are not a sales-led business, a machine that just uses clients to deliver profit to our shareholders. Our fundamental offering is investment product — and good investment performance.
Also, at the time we were acquired, the financial services world was getting better at accepting that businesses could have a high measure of independence within a bigger financial services empire. With the days of aggressive cross-selling gone, it is widely recognised that a fund manager is a thoroughbred and, if not treated well, will seek out an owner that respects its values. If we had changed our name to Prudential Asset Management, we definitely would have been viewed as a branch of the life insurance company and would not have built the business we have today.
Not surprisingly, having the support of the Prudential board during this time was critical — just as the support of the M&G Investments board had been crucial to me two years earlier. In an organisation like this, regular communication upwards has been essential in guarding against unpleasant surprises. The Prudential board was comfortable with the state of our operations and had no trouble allowing us to arrive in the morning and get on with the job of running our business. We have never felt as if “Big Brother” was telling us what to do. Within a year of the takeover, I was asked to join the Prudential board.
Chaffer > Has M&G’s culture of independence affected your leadership style?
McLintock > Regardless of culture, I believe in assembling a team of good people and giving them as much freedom as they want to get on with the job. This is a fundamental belief of mine. If you have good people, you can give them as much room as they want, keep your hand gently on the tiller, protect them from outside interference and make judicious changes when you think they are needed.
Chaffer > How do you take this belief and make it a reality?
McLintock > Working on the assumption that good ideas tend to come up from underneath you, I made the decision four years ago to decentralise the organisation. With the exception of the acquisition, it was the most significant change I’ve made. Rather than have one board make centralised decisions across a variety of different activities, we carved M&G up into devolved businesses, each focusing on a particular area of expertise — equities, fixed income, UK. retail distribution, international distribution and operations. Each business has its own board and its own agenda; they’re completely responsible for their P&L.
People now take full responsibility for running their business, from controlling their costs to anticipating future market trends. When measured against the performance of their particular business, people bring more energy to the organisation. My job is to listen and coax ideas out of people. Equally important is applying the brake pedal if I think someone is in danger of breaching a fundamental principle. But decentralisation will only work if you give people the right atmosphere, a place where they want to work, and freedom to flourish and come up with new ideas.
Chaffer > In less than a decade you’ve worked to change the culture, orchestrated the acquisition and decentralised the organisation. How did you go about making these decisions?
McLintock > If you’re in charge of a business, you are always thinking about the business, it never leaves you. When making decisions, however, the first thing I ask is “What does the team want?” I’m not going to give in to every wish, but it’s imperative to keep the right people on your team and listen to them.
It was this philosophy that fuelled my decision to decentralise. We needed to reenergise M&G and I thought, wouldn’t people enjoy work more and respond better if we gave them greater responsibility? When we sold out to Prudential, this was a classic case of balancing numerous interests — shareholders, employees, customers. The deal was obviously in everyone’s best interests and, by explaining it correctly, employees accepted the decision.
Chaffer > How do you ensure that M&G remains competitive and at the cutting edge?
McLintock > We’ve had no choice but to respond to the changing asset management industry. In a world awash in capital and information, individuals who deliver the outstanding returns become increasingly valuable and take a greater share of the profit. Our people could walk away and set up business somewhere else. Because this is such a big threat to our profitability, we have needed to “incentivise” our key people in the appropriate way.
But I fundamentally believe that to stay competitive and viable you also have to give people the freedom to be innovative. That’s why our decentralisation strategy works for us. It’s a complete myth for me to think I can sit in my office and come out with fantastic ideas. We are the sum total of a lot of individuals and those individuals’ energies.
Chaffer > Given all of the changes within the asset management industry, your length of tenure is quite unusual.
McLintock > Most, if not all, asset management firms have faced a rough period at some point over the past decade. As chief executive of M&G, I’ve learned many lessons and have become much better at smelling trouble and backing my instincts. Having been in this role for as long as I have, I am much more confident of my judgment.
I also surround myself with people whose judgment I really value and I listen to them. When recruiting your team, be diligent in ensuring you have the right mix of skills. In a well-run business, people don’t notice that the business is being run. The team members complement each other and the business almost runs itself. I just need to keep my hand gently on the tiller. It’s also critical to walk the floor, but you do need to set yourself apart a bit while remaining approachable. It’s a fine line to walk.
So I would say, trust your instincts and your judgment. If you look at my decision to decentralise the organisation, it involved significant changes to the way we worked. Some people didn’t like it and I had people in and out of my door saying it wasn’t going to work. But I had to trust my instincts and not let too much of the noise get in the way. The more you encounter these situations over time, the better you get at making the hard decisions.
Chaffer > You’ve been through so many challenges. Is the excitement still there?
In the beginning, when I was meeting with analysts and the press, it was heart-pumping stuff. Everything was so new. Now, as I get older, the adrenalin pumps a little less — thankfully. Despite that, I’ve never been so satisfied. This has been the most rewarding phase of the business, because today we’re delivering great investment performance, attracting record fund flows and delivering very strong profits growth. The business is in a sweet spot and it’s a very nice feeling after all the hard work!
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