Not Just for Yogurt

A strong corporate culture is good for employees, good for customers and good for business.

As we get older, we start doing things that old people do and thinking things that old people think. One thing I think about a lot is how important it is to work at a firm with a good culture. One thing I find myself doing a lot more often is arguing with the TV.

On the day I wrote this, I happened to be doing both.

I was starting my day as usual, sitting on the exercise bike with a cup of coffee reading overnight research notes on my iPad and watching business TV. A former airline executive was being interviewed about a well-known U.S. carrier that’s had some high-profile customer-service troubles. Asked if that airline has a “culture problem,” the talking head said he didn’t think so.

I let the TV have it. “Oh, come on! If it’s not a culture problem, what would you call it? Until they fix that culture, they’re unlikely to fix the business!”

Culture Lives in Results

I have been fortunate to work at firms whose leadership place tremendous emphasis on building and maintaining a good culture. That makes a huge difference to employees and clients. Ultimately, it drives positive business performance, as well.

In the heyday of bank and insurance mergers during the late 1990s that shaped much of the financial services industry as we know it today, a famous meeting took place between the two “Sandys.” In 1998, discussing a potential tie-up, J.P. Morgan CEO Sandy Warner talked extensively about the importance of preserving Morgan’s “culture,” but Travelers CEO Sandy Weill was unimpressed. Later he told his top executives that all the talk about culture reminded him of yogurt. The talks died and Travelers eventually merged with Citibank.

Now, Weill was one of the most fabled dealmakers in the history of Wall Street, but as a deals guy, building a corporate culture was not his priority. In the 20 years since that meeting, history has given its judgment: Citigroup’s stock is down 75%; J.P. Morgan’s is up 150%. Since Michael Corbat took over as CEO in 2012, Citigroup has enjoyed a recovery. It may be a coincidence, but Corbat started his career with Salomon Brothers, a firm that nurtured a strong culture.

Culture gives you a guiding identity. Last year I travelled with my colleague, Jon Jonsson, around his spectacular home country of Iceland. I met some great people, including Jon’s brother and old friends. Iceland’s powerful culture impressed me. It is fiercely independent and yet fearlessly outward-looking; the country gets 85% of its energy from geothermal and hydropower, a great example of how it embraces modern technology while placing a high value on the environment. Iceland’s culture helps explain how 330,000 people in the middle of the North Atlantic punch so far above their weight in everything from business to music to soccer.

Maintain a Strong Culture to Recognize a Strong Culture

The airline business is tough. To be successful, you have to combine a big, highly regulated business reliant on complex technology and logistics with excellent customer service. Airlines such as Singapore and Southwest show that an important ingredient for success is a strong corporate culture—this is especially true when hard decisions need to be made. Just Google “Peggy Uhle” for an example.

Asset management is tough, too. We also deal with complex technology and regulation. Our performance for clients can be subject to the short-term, sometimes painful, vagaries of the markets, which means that our service for clients must be consistent, attentive and focused on the long term.

A strong corporate culture helps us focus on that, which is why Neuberger Berman nurtures it carefully. On the day we completed our management buyout and returned to employee ownership back in 2009, our CEO set the tone.

“When we were part of a large publicly owned bank, we necessarily had a lot of objectives,” he said. “From today we have just three: Take care of our clients’ money, take care of our clients’ money and take care of our clients’ money.”

Nearly a decade later, we remain a partnership that values both its clients and its employees. Listening to our clients’ needs makes us entrepreneurial: Across our entire investment platform, more than a quarter of our assets under management are in strategies that didn’t exist at Neuberger Berman before 2010.

That is our culture. It defines who we are. Just as important, it helps us to recognize strong cultures in the companies we invest with, and to be wary of those who think they’re only good for souring milk. I finished my early morning routine with my new favorite breakfast meal: Icelandic yogurt.


Brad Tank is a Managing Director, Chief Investment Officer, and Global Head of Fixed Income at Neuberger Berman. He is a member of Neuberger Berman's Operating, Investment Risk and Asset Allocation Committees. To learn more, see Mr. Tank’s bio or visit www.nb.com.

In Case You Missed It

  • U.S. Consumer Price Index:  +0.2% in February month-over-month and +2.2% year-over-year (core CPI increased 0.2% month-over-month and 1.8% year-over-year)
  • U.S. Retail Sales:  -0.1% in February
  • NAHB Housing Market Index:  -1 to 70 in March
  • U.S. Housing Starts:  -7.0% to SAAR of 1.24 million units in February
  • U.S. Building Permits:  -5.7% to SAAR of 1.30 million units in February
  • Euro Zone Consumer Price Index:  +0.2% in February month-over-month and +1.1% year-over-year

What to Watch For

  • Wednesday, 3/21:
    • U.S. Existing Home Sales
    • FOMC Meeting, Summary of Economic Projections and Press Conference
  • Thursday, 3/22:
    • Japan Consumer Price Index
  • Friday, 3/23:
    • U.S. Durable Goods Orders
    • U.S. New Home Sales

– Andrew White, Investment Strategy Group

Statistics on the Current State of the Market – as of March 16, 2018

Market Index WTD MTD YTD
Equity      
S&P 500 Index -1.2% 1.5% 3.4%
Russell 1000 Index -1.1% 1.7% 3.4%
Russell 1000 Growth Index -1.0% 2.1% 6.4%
Russell 1000 Value Index -1.2% 1.3% 0.2%
Russell 2000 Index -0.7% 5.0% 3.5%
MSCI World Index -0.7% 0.9% 1.9%
MSCI EAFE Index 0.2% -0.2% 0.1%
MSCI Emerging Markets Index 0.5% 1.6% 5.0%
STOXX Europe 600 -0.4% 0.4% -0.3%
FTSE 100 Index -0.8% -0.7% -5.9%
TOPIX 1.2% -1.8% -4.4%
CSI 300 Index -1.3% 0.8% 0.7%
Fixed Income & Currency      
Citigroup 2-Year Treasury Index 0.0% 0.0% -0.3%
Citigroup 10-Year Treasury Index 0.4% 0.3% -3.4%
Bloomberg Barclays Municipal Bond Index 0.1% 0.1% -1.4%
Bloomberg Barclays US Aggregate Bond Index 0.2% 0.1% -2.0%
Bloomberg Barclays Global Aggregate Index 0.3% 0.5% 0.8%
S&P/LSTA U.S. Leveraged Loan 100 Index 0.1% 0.2% 1.4%
ICE BofA Merrill Lynch U.S. High Yield Index -0.2% -0.4% -0.6%
ICE BofA Merrill Lynch Global High Yield Index -0.2% -0.1% 0.0%
JP Morgan EMBI Global Diversified Index 0.1% 0.0% -2.0%
JP Morgan GBI-EM Global Diversified Index -0.6% -0.2% 3.2%
U.S. Dollar per British Pounds 0.4% 1.0% 2.9%
U.S. Dollar per Euro -0.3% 0.7% 2.3%
U.S. Dollar per Japanese Yen 0.8% 0.6% 6.2%
Real & Alternative Assets      
Alerian MLP Index -2.9% -2.0% -6.4%
FTSE EPRA/NAREIT North America Index 0.9% 3.9% -7.3%
FTSE EPRA/NAREIT Global Index 0.9% 2.8% -2.9%
Bloomberg Commodity Index -0.6% -0.8% -0.6%
Gold (NYM $/ozt) Continuous Future -0.9% -0.4% 0.2%
Crude Oil (NYM $/bbl) Continuous Future 0.5% 1.1% 3.2%

Source: FactSet, Neuberger Berman.

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