Growing up, I always had dreams of becoming a teacher. My mother was a teacher and I used to spend a lot of time at her school, wearing her oversized heels and pretending to teach imaginary kids mathematics while waiting for her to finish classes.
Becoming an actuary, particularly one who works in the investment sector, was far from my mind. But I was an eager and somewhat focused math student and the rest is history. Like many, I started in the investment industry, very passionate about what I was doing but without a clear idea what my purpose was and why this would even matter for the development of the broader industry.
Having a sense of purpose is important. It is individuals, just like us, who are responsible for setting missions and objectives, driving culture and behaviours, and generally making decisions about how much our businesses contribute (or not) to various stakeholders in society and to the planet as a whole. If we want to drive change in our organisations and broader industry, we need to change what we do as individuals. We need to examine our own motivations and behaviours and understand how they combine to drive the objectives of our firms and the industry.
The purposeful self
Deci and Ryan’s self-determination theorypoints to the fact that we are all influenced by both intrinsic and extrinsic motivations. Intrinsic describes something that is inherently interesting or rewarding, while extrinsic motivations lead to some positive outcome, such as high pay or avoidance of punishment.
Several bodies of research question whether extrinsic motivations produce positive long-term results. Princeton academics Roland Bénabou and Jean Tirole note: “In well-known contributions, [Amitai Etzioni, 1971] argues that workers find control of their behaviour via incentives ‘alienating’ and ‘dehumanising’, and [Edward Deci and Richard Ryan, 1985] devote a chapter of their book to a criticism of the use of performance-contingent rewards in the work setting. And, without condemning contingent compensation, [James Baron and David Kreps, 1999] conclude that: there is no doubt that the benefits of [piece-rate systems or pay-for-performance incentive devices] can be considerably compromised when the systems undermine workers’ intrinsic motivation”. (See “Modern organisations”, Amitai Etzioni, 1971; “Intrinsic motivation and self-determination in human behaviours”, E Deci and R Ryan, 1985; and “Strategic human resources”, J Baron and D Kreps, 1999.)”
In short, being driven by self is a vital ingredient in achieving positive long-term results.
At a Thinking Ahead Institute event earlier this year, the top three responses to the question, “What motivates you to perform in your current role?” were: interesting and enjoyable work, helping clients and helping to do something meaningful with societal purpose.
The lowest-ranked responses were ‘pay’ and ‘helping my organisation to achieve its financial goals’.
Attendees were also asked to choose which of two statements about their organisation they valued more: 94 per cent of attendees chose “my organisation produces more societal wealth and wellbeing”, while only 6 per cent chose “my organisation produces more profits”. These results suggest that intrinsic motivations linked to a positive purpose (such as improving societal wealth and helping clients) are highly valued.
Purpose-driven motivation is important. A study by State Street Centre for Applied Research and the CFA Institute, Discovering Phi: Motivation as a hidden variable of performance, argues that individuals who have a mindset of delivering performance that is driven by purpose, habits and incentives (collectively, ‘phi’) contribute to better organisational performance and client satisfaction, and also are better engaged. These results suggest that connecting the mission, values and culture of an organisation with an individual’s sense of purpose is vital.
The purposeful self → the purposeful organisation
Institutional investment is a team game. Through teams, strategic investment decisions are made, value is added to portfolios, or destroyed, and a progressive, or regressive, culture is built. In a Thinking Ahead Institute paper – How to Choose: A primer on decision-making in institutional investing –we note that collective judgement can be superior to that of any individual within a group as long as diversity, independence and an effective means of aggregating views are present. (We do note that groups introduce biases of their own. James Surowiecki’s three conditions are expressed more clearly in his 2004 book The Wisdom of Crowds. They are critical to the intelligent design of groups.)
Individual purpose is validated by a strong team culture and a strong team culture is built through the aggregation of individual purposes to drive towards a common objective. Effective aggregation requires a keen awareness of social dynamics; perceptiveness by leadership and group members is key. In short, investment professionals need to be technically and emotionally capable.
The purposeful self → the purposeful organisation → the purposeful industry
We need a coalition. A purposeful industry can emerge only if enough organisations’ individual purposes are aligned, just as an organisation is only as good as the people within it. The purposes of people, organisations and the industry must all be aligned or the system will be suboptimal at best and, at worst, parts of it can break down – think the global financial crisis. We believe positive change can be effected only through a coalition of individuals with a common mission to ensure that the investment industry drives positive social value.
The investment industry cannot thrive without the trust of wider society – that society will obtain fair and sustainable results from the industry’s services. To gain this trust, we as building blocks of the industry need to agree on the broader purpose of investment and better understand how our actions connect with this purpose. We need to shift the balance to improve the value proposition to society. Without that, we are in danger of losing our social licence to operate.
Marisa Hall is a director of the Thinking Ahead Group, an independent research team at Willis Towers Watson, and executive to the Thinking Ahead Institute.