7 Steps to Upping Your Leadership Game
While many organizations boast of multiple managers, not as many can say they have people who excel at leadership. Why is it so hard to be a good leader? Most people aren’t trained – even in the best schools, a business degree has many technical aspects, but there’s not a lot on the “soft skills” which are the essence of good leadership. If you believe your leadership approach needs a refresher, consider these 7 Steps to upping your leadership game:
- Balance humility with ego. It’s important for leaders to be confident and show that they know what they are doing and excite their people with their confidence. However, the best leaders balance ego with a healthy dose of humility: They self-reflect, they take corrective feedback even from those who are levels below them, and they seek ways to grow and change.
- Mentor, but not just “do as I do”. Successful people got where they are because they did many things right and have a certain set of talents and style. Unfortunately, when leading, it’s not realistic to expect everyone else around you to do it the same way you did it. Strong leaders recognize style differences – just because you are an assertive and results-oriented person doesn’t mean the person working for you with a calmer, more thoughtful style can’t be just as effective in their own way. Being able to mentor, and to shift style while doing it, is the mark of a talented leader. It takes effort and focus and it’s a lot more work, but the payoff is much greater.
- Listening is as important as giving guidance. The adage “seek to understand before you seek to be understood,” which Stephen Covey eloquently shared, fits here. Leaders should want to teach, guide, and train their constituents, but the best leaders listen and learn first, then guide second. Listening takes patience and strength, so a leader can’t be running so quickly that they miss out on the important nuggets they can glean by listening.
- The best ideas may not be yours. Leaders need to have the vision and the ideas about how to accomplish the vision. The team looks to the leader for encouragement and enthusiasm, but the leader doesn’t have to know it all. A good leader can paint a picture of where the team can go, and then let others in the team create pathways and avenues to be able to get there. A good leader stays open and recognizes that his or her gift can be in leveraging the ideas of others, not in giving away all of the answers all of the time.
- People want to be led. While good leaders should listen, take others’ ideas into account, and be interested in hearing what their team has to say, the truth is that most employees want a strong leader they can be excited about following. Communicating a clear and effective vision, showing the team where they fit in the overall picture, and helping them to be the best they can be in order to contribute are among the most important and fulfilling aspects of leadership.
- Trust is earned. While in the past the common wisdom said the person in authority is right and in charge, but the times they are a-changin’. Now, trust is developed over time, and employees are skeptical of those in charge until they can see the leader has their best interests at heart. Recognize that they might not trust you, or want to follow you until you give them a reason to do so. Do what you say you will, and communicate when you make a mistake. Put a priority on earning trust over time.
- Give credit to the team. Strong leaders don’t need to hog the limelight. They don’t need to be the ones taking the accolades all of the time. In fact, a good leader wants their team to succeed and wants others to get credit for their great ideas and accomplishments. Know that when your team does well, you do too, and enjoy the glow that comes from celebrating the work of others.
Being a consistently strong leader takes time, energy and focus. Be willing to invest all three to be the best leader you can possibly be.
Sizing up Strategic Beta
Interest in strategic beta ETFs is rising. A few simple guidelines can help investors pick from among the often-bewildering number of options.
The number of strategic beta ETFs has grown at 20% a year, consistently in good markets and bad, since the year 2000. With good reason: Strategic beta ETFs offer a more thoughtful passive option than cap-weighted indexes—and they can do so with a more transparent process and lower fees than actively managed funds.
Bright future, dim past
All well and good, but how should investors assess any particular strategic beta ETF? Close to 40% of these funds have been in operation for less than three years. This lack of an established track record can make it hard to validate their claims. ETF sponsors may try to make up for that shortcoming with back testing, running simulations of holdings they might have had against actual past market performance, but that has its limitations:
Back testing doesn’t always account for fees, liquidity or transaction costs.
Back tests are “selection biased”—that is, back testers have a tendency (conscious or not) to engineer positive outcomes. Live outcomes are therefore likely to be inferior.
Too great a focus on recent history can lead to “driving in the rearview mirror.” While an index or ETF may solve the problems of yesterday well, an investor’s focus should instead be on solving the potential problems of tomorrow.
Three steps to an informed judgment
Because the indexes tracked by strategic beta ETFs are by design somewhat exotic, effective assessment of them calls for some digging:
- Investors first have to understand who the index designer and asset manager are (they may not be the same people). They should have a clearly expressed investment philosophy and the expertise to enact it in practice.
- The properties of the portfolio should reflect the investment philosophy. Not only does the transparency of ETFs allows examination of the holdings to ensure that this is the case, it also measures such as active share relative to a cap-weighted benchmark or turnover can indicate whether an ETF is performing as designed.
- Performance can also be used to confirm that an index is doing its job. While short-term results shouldn’t be given too much sway, the index designer should be able to explain when and why an index will perform and when it might not.
One key aspect of performance shared with traditional passive management is tracking error. Like earlier cap-weighted index tracking funds, strategic beta ETFs should have minimal tracking error to their own indexes. Beware, though, the tracking error to the benchmark can be large and dynamic, it is by this differentiation that strategic beta adds value.
Made to measure
Strategic beta does not defy analysis, despite its novelty. Indeed, it has a lasting advantage over standard active manager due diligence. Strategic beta, after all, is rules-based. What an investor sees in straightforward, well thought-out index composition rules is what the investor will get. In that sense, strategic beta is relatively immune to the personnel changes, style drift and index hugging that can challenge actively managed mutual funds.
Learn more about ETF due diligence here.
This document is a general communication being provided for informational purposes only. It is educational in nature and not designed to be a recommendation for any specific investment product, strategy, plan feature or other purpose. Any examples used are generic, hypothetical and for illustration purposes only. Prior to making any investment or financial decisions, an investor should seek individualized advice from a personal financial, legal, tax and other professional advisors that take into account all of the particular facts and circumstances of an investor’s own situation.
Opinions and statements of market trends that are based on current market conditions constitute our judgment and are subject to change without notice. These views described may not be suitable for all investors. References to specific securities, asset classes and financial markets are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations. Past performance is no guarantee of future results. Investment returns and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. ETF shares are bought and sold throughout the day on an exchange at market price (not NAV) through a brokerage account, and are not individually redeemed from the fund. Shares may only be redeemed directly from a fund by Authorized Participants, in very large creation/redemption units. For all products, brokerage commissions will reduce returns.
J.P. Morgan Asset Management is the marketing name for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide. J.P. Morgan Exchange-Traded Funds are distributed by SEI Investments Distribution Co, One Freedom Valley Dr., Oaks, PA 19456, which is not affiliated with JPMorgan Chase & Co. or any of its affiliates.
For additional disclosure
For a longer discussion, please see our recent publication Strategic Beta’s due diligence dilemma (J.P. Morgan, April 2017).
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