68 Questions Every Incoming Chief Investment Officer Should Ask
/The CIO role is the pinnacle for most institutional investors. The prestige, the pay, and the ability to lead a team is a big draw.
However, the challenges of leading an investment team are rarely discussed. Your success or failure as a CIO isn’t determined by the glamorous parts. It’s determined by all the organizational and team issues you’ll inherit as you step into your new role.
As if investing alone isn’t hard enough, it becomes a nightmare when you join an organization that is completely different than what you were “sold” during the recruiting process.
What is not being addressed with clarity and honesty?
How can I separate the sales pitch from reality?
What’s being hidden from me?
No one is going to offer you the ugly truths. You must ask for it. And keep asking until you get it.
While the CIO role is the desired endgame for many investors, the question is, are you sure you want it?
Remember, you don’t get to just choose the exciting aspects of the job.
You must take the good and the bad. And often the negatives will dominate the positives.
So how do you know what you are walking into?
Here’s what I’d be asking:
Cultural Fit
1. Does this organization match my personality and skills?
2. Am I a risk-averse investor going to work for a risk loving family office full of early-stage VC?
3. Am I a risk-seeking investor looking at a bureaucratic insurance company that’s afraid to make a mistake?
4. What skills am I bringing to the organization that others can’t bring? Am I just a figurehead babysitting the organization?
5. Is this role giving me different growth opportunities than before, or just different problems?
6. Am I just replacing my current set of problems with a new set of problems only at a new organization with a new title?
7. Am I a conventional investor trying to work for an unconventional organization? Or vice versa?
8. Where can I already envision big disagreements on leadership, management, and investment strategy?
9. What dumb shit will I have to undo? Does the team believe in technical analysis and other nonsense?
10. Am I looking to build the next Yale endowment, but I have a team that’s just looking to hang on until retirement? How do I reconcile that?
References
11. Can I talk with former employees or industry colleagues and get an independent opinion on the organization?
12. Can I talk with as many members of the team as possible? You want unfiltered opinions, not rehearsed garbage. Young employees are your best bet. Some senior members won’t tell you much. Some will tell it all. Triangulate your assessment by talking to as many people as possible.
Oversight Issues
13. How can I really assess the quality of the board of directors or clients?
14. Are they difficult to work with?
15. Are they micromanagers? If so, how many, and which ones?
16. How can I get independent confirmation and not rely on assurances?
17. How much flexibility will I have?
18. Am I just a puppet for the board to dictate their wishes?
19. Will they support me when markets are tough and through periods of underperformance?
20. If I’m working with a board of directors, who is on the board for the right reasons?
21. Who’s on the board for the status? The notoriety?
22. What’s the real driving objective of the organization? Don’t rely on trite statements like “supporting the mission” or “risk-adjusted returns.” Instead, the real objectives are much simpler: Many committees are driven by the fear of looking bad or underperformance, making it impossible to invest opportunistically. Some committee members believe they are the next Buffett and will do your job for you. Good luck with that.
23. What’s the rigor behind the oversight? Just a rubber stamp? Or in-depth discussions and substantive feedback on opportunities.
24. Will you be expected to conform to what was done in the past? Or can you create a new path for the organization?
25. Will you be driven by consensus regarding what other similar institutions are doing?
26. Is the board consistently referencing competitors and asking why you aren’t doing the same?
Team/Organization
27. How much legacy bullshit am I walking into?
28. What relationship/communication issues haven’t been addressed that have led to discontentment and angst?
29. How much work will it take to undue the unaddressed damage?
30. Is it reversible?
31. What’s the quality level of the team?
32. You’ll hear this all the time – we have great people! It’s empty rhetoric. Again, find evidence, not assurances.
33. How are the relationships among the team members?
34. What unresolved issues are lingering among the team?
35. Is it a real team? Or just a collection of individuals doing their own thing?
36. Who needs to be fired?
37. Who are the people that are nice to your face but poison the culture with bad attitudes and snide remarks?
38. How willing is the team to change? Have they been doing the same thing for 20 years?
39. What evidence can I uncover to show a history of embracing change, rather than preferring comfort?
40. Is the team attitude one of optimism? One of pessimism?
41. Which teammates are just showing up to collect a paycheck?
42. Who is motivated by doing something great?
43. Is the team high agency? Meaning, do they take charge and responsibility for their outcomes?
44. Or do they complain and defect blame?
45. Am I foolish enough to think I’ll be able to change decades of entrenched behavior and culture?
46. Is it worth the effort?
47. How quickly can I assess and separate the high achievers from those who are taking up space?
48. Who will quickly become trusted colleagues?
49. Who are the backstabbers, whiners, and complainers?
50. Will I have the courage to make painful changes and create the team I want? Or will I just work with what I’m given and settle for comfortable mediocrity?
Investment Process
51. What possible edge will I have with this team?
52. Does the organization have the resources, incentives, and attitude to find unique ideas?
53. Do I have a list of irreplaceable, high-quality managers?
54. Or am I going to have to start from zero and rebuild the investment lineup?
55. Where will I be able to concentrate resources to establish an investment edge?
56. Or will the approach be to overdiversify and cover your ass with meaningless allocations with no real chance of delivering consistent outperformance.
57. Will I get the resources to support the vision I have for the organization?
58. Are the promises from the board/client empty promises or reliable commitments?
59. Is there expertise embedded in the organization? Is there something to build on?
60. How many years will it take to build expertise if none exists?
61. Am I ready for that challenge?
Operations/Systems
62. In essence, how close is the organization to collapse if one person leaves or one system goes down?
63. How much robustness is built into the trading, reporting, accounting, tax, and compliance functions?
64. What is the limiting constraint on the operational side that will affect the investment goals?
65. How much manual work is there? How much is automated?
66. What’s the attitude of the middle/back-office team?
67. Are they ungrateful because they’ve been worked to death to keep the organization running while the front office gets the attention?
68. Are people maintaining manual processes because they don’t want to automate themselves out of a job?