Lessons for Change Leadership from Golf's Ryder Cup and PIMCO

The 2014 Ryder Cup showed with great clarity, how one team demonstrated excellent teamwork and spirit, borne out of the enormous need to change the way it did things to achieve the desired result – and one didn’t! PIMCO, the world’s largest and most influential bond manager has had change management problems as well and also gives real insight into how (not) to deal with environmental change for the organisation.

The article is written by David Thornton of ‘The Penny Sleuth’ and reproduced here by kind permission of Fleet Street Publications Ltd.

“Two esteemed American institutions came under a lot of pressure recently. The US Ryder Cup team was trounced by Europe yet again. And PimCo, the world’s largest and most influential bond manager, hit the headlines for all the wrong reasons.

Funnily enough, I think they have a few common problems to solve and two valuable lessons to offer investors.

Let me start with the golfers.

For those of you who don’t follow the sport, the Ryder Cup takes place every two years between teams from the US and Europe.

Golf is (usually an example of) the ultimate individual sport, since the player normally pits his skills against the course rather than a specific opponent. But the Ryder Cup format brings teamwork into play and the added pressure of not wanting to let your teammates down.

For three or four decades after the War (World War II) it was one-way traffic. The US won so consistently that interest in the competition fell away.

In 1979, the rules were changed allowing players from the Continent to take part. This gradually improved the original Britain and Ireland side and invigorated the Cup as a whole.

In the last twenty years, Europe’s performance has been transformed and they’ve become dominant, winning eight out of the last ten events.

Which brings me to the first lesson – the US team’s dismal record is really hard to fathom when you look at some of the wonderful American golfers who’ve been available during these lean years. Even the great Tiger Woods has a mediocre Ryder Cup record with more losses than wins. For so long the US had things their own way; but it suddenly stopped working, despite all that talent.

Now I realise this isn’t a sports report. So how does all this tie in with the goings on at PimCo?

As it turns out, PimCo are having the exact same problems.


Even a winning formula needs to be open to change

PimCo, which is based in California, is the world’s biggest bond manager with around $2 trillion in assets.

Its flagship Total Return Fund, which was managed by Bill Gross, was worth a staggering $292bn at last year’s peak.

Mr Gross founded the firm 47 years ago and has been the poster boy for the long bull market in bonds. And he was still at the helm at the age of seventy.

That is until last week, when he decided to jump before he was pushed.

Rather like his compatriot golfers, he’d enjoyed decades of success. But suddenly something changed and the magic seemed to disappear.

Just as the introduction of Continental golfers might have been the trigger for the Ryder Cup turnaround, maybe quantitative easing or ultra-low interest rates was the turning point for Bill Gross.

He used to have a knack for getting on the big trends in the bond market and playing them for all they were worth. But in the last couple of years his fund has languished and poor performance resulted in investors heading for the exit – there’s been eighteen successive months of outflows.

Some of Mr Gross’s public pronouncements haven’t helped his reputation either – he infamously said UK gilts were so dangerous they were “sitting on a bed of nitroglycerine”; but gilt yields just carried on heading lower.

Mr Gross, like the American Ryder Cup team, might have got too complacent.

Complacency is the enemy

When you’ve been on a long winning streak it’s easy to get a bit complacent and carried away with your exalted status. No one does this consciously; but I’m sure it’s there. Maybe you just aren’t quite as open-minded and sensitive to change as you used to be.

After all, why should you change a winning formula?

So when the bond market or the opposition golfers that you’ve been used to thrashing start becoming a tougher opponent, it’s very hard to be nimble and adapt quickly enough. And when you get behind the curve, after so many years ahead of it, it can be almost impossible to turn things around.

In order to fix this problem, both groups need to take, radical action. PimCo have done this by parting ways with the person who was so closely identified with the company. They will need to follow up with other changes; but at least they’ve made the break.

We’ll have to see if the American golfing establishment also conducts the sort of dramatic shake-up that it badly needs.

As well as the problems of complacency, these two examples can also teach us a lesson about leadership.


Good players usually don’t make good leaders

In the Ryder Cup, both sides have non-playing captains who organise the sides and choose who plays in which match.

Last week the US was led by a golfing legend, Tom Watson. In an amazing post-tournament press conference, leading US player Phil Mickelson tore into what he saw as his captain’s shortcomings. Maybe Watson’s leadership had been poor; but the episode betrayed an absence of team spirit and togetherness – qualities the Europeans clearly had in abundance. It was also extremely disloyal and unprofessional – it felt a bit like having a go at Bobby Charlton or the Queen!

However, it’s not all that surprising. Sporting stars have to play a team game – their big egos need to be managed through strong leadership. But star players can resent non-playing captains, even ones as distinguished as Tom Watson. And great players often don’t make good captains. Leadership is a specialist skill – it’s very hard to get right; and the star player isn’t always the right man for the job.

A similar problem emerged at PimCo earlier this year when Mr Gross fell out with his CEO Mohamed El-Erian. El-Erian, who left the company in January, was almost as high-profile as Gross himself.

Differences of opinion and personality clashes are easier to gloss over when the performance engine is humming along. But they quickly get exposed when the numbers aren’t good enough.

As a former fund manager myself, I recognise these same leadership issues all too well.

Your star managers have to fit into the team. After all, one person can’t manage billions, let alone trillions, singlehanded. And often the skills that make someone a great fund manager don’t transfer well into managing people. “


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