Great Management Teams

We often speak of two essentials for good companies: good products and good practices. However, a company’s people are just as crucial. Leaders set the ethos and direction. Their values and decisions determine whether a business will maintain a sustained commitment to doing good and serving the world. A company’s management is at the center of a business, interacting with every other stakeholder. There’s no part of a business untouched by its leaders.

Great management requires more than only an inspiring vision or having charismatic figures who exude business acumen and savvy dealing. Great management rests on integrity and values. Great leaders have strong character and virtue. “The supreme quality for leadership is unquestionably integrity,” wrote Dwight Eisenhower. “Without it, no real success is possible…”^[1] Good leaders live by principles larger than themselves, and this firm grounding provides the conviction and trust necessary to build enduring cultures and navigate uncertain futures.

“When we are evaluating companies,” says Dolores Bamford, Eventide’s Co-Chief Investment Officer and Senior Portfolio Manager, “we look for management teams that have high integrity, high credibility, that are humble, servant leaders. We’re looking for management teams that are building positive cultures.” And we can’t learn a management team’s genuine values—and how they get fleshed out amid intense challenges—from a corporate filing or a marketing piece. We have to see how they work, up close.

Not too long ago, we were considering investing in an energy company that touts customer focus and doing the right thing. But we had questions around their infrastructure and safety due to several fatal explosions. As part of our due diligence, our research analyst approached the CEO during a meeting to ask for clarity. The CEO brushed off our analyst and abruptly turned to converse with someone else, as if the question wasn’t worth his time. We chose not to invest because the management’s actions didn’t match their public rhetoric. Their management was unwilling to engage a question central to our values and to their customers’ well-being, eroding our confidence in their priorities. Great management teams don’t merely talk about values; they live them.

Eventide seeks out good companies with an expansive vision incorporating and caring for all the people their business intersects. And maintaining these responsibilities requires having good people at the top crafting and safeguarding the vision from the onset. You can’t have a people-centered company without great people leading. Management is a human art.

Ed Freeman, professor at the University of Virginia’s Darden School of Business, has made a case study of one grocery retailer who’s kept a laser focus on people, noting how this grocer “understands its purpose [is] to try to heal people…and have people eat in a more healthy way.”^[1] The crucial element to this story is how its founder championed people-centered business (or “employees first” business).^[2] And the founder’s successor so integrated these values himself that instead of merely maintaining the status quo, he scrutinized blind spots and disrupted policies inconsistent with their ideals.^[3] Without these two leaders, this grocer would be a completely different company.

Amid the Artificial Intelligence (AI) revolution, it’s especially crucial to have people at the center of a business. AI offers groundbreaking potential to improve operational tasks, but AI cannot intimately comprehend human experience or human needs. AI may make technical and analytical functions more efficient, but it can never replace human wisdom, creativity, empathy, emotional intelligence, and moral judgement. Only humans bear God’s image. God has entrusted humans, not machines, with the responsibility to do good work which serves the world and stewards creation.

People are the heart of business. “Leadership is about ideas and people…” Freeman insists. “[We] have to understand that picking the right people is the most important task [we] have.”^[4]

If we fail to look closely at a company’s management, we ignore a crucial element affecting a business’ vitality, strategy, and trustworthiness. We’ll miss signs of poor management, a lapse which may prove catastrophic. Management’s shortcomings usually only reveal themselves when it’s too late, when things go disastrously wrong—and often in a costly, public crash.

From 1996-2001 (an unprecedented six years in a row), Fortune named the energy behemoth Enron “America’s Most Innovative Company.”^[1] By most accounts, Enron was a model corporation with a CEO and leadership team revered as wizards of the industry. However, in 2001 (while their sixth Fortune award was still gleaming), Enron went bankrupt, sending tremors through the markets and wiping out $11 billion from shareholders.^[2] Scandal devoured the airwaves, with revelations of systemic fraud and corruption. A Bloomberg article revealed longtime CEO Kenneth Lay’s “legacy of shame” and laid the blame squarely on leadership. “[Lay’s] mismanagement and dishonesty brought down a giant corporation.”^[1]

Jeffrey Skilling, Lay’s right hand man who became CEO before the public meltdown, based much of his managerial philosophy on the idea of a Darwinian “selfish gene,” and according to The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron, Skilling relied on greed as his most powerful motivator.^[2] One Enron director recounted Skilling’s blunt, chilling admission: “I’ve thought about all this a lot, and all that matters is money. You buy loyalty with money. This touchy-feely stuff isn’t as important as cash. [Money]…drives performance.”^[3] A morally bankrupt vision rots a company’s soul. Calamity was inevitable.

In stark contrast, we believe that great management teams pursue a virtuous vision and have leaders with values, integrity, and humility. Leaders committed to excellence, who have vast and deep expertise—and who know how to marshal technology, skill, resources, and innovation for good rather than for harm. “It's imperative that we focus on management teams that are going to be able to help their customers survive and thrive amid all this change,” says Eventide’s Bamford. “And you need a very special, humble, servant-oriented, service-oriented, client-oriented management team to do that. It takes a very special management team to have all these characteristics.”

It takes great management teams to lead great companies. Eventide is committed to finding—and investing in—both.