20 Change Management Lessons from Working Over 20 years in Change
Talk to almost anyone about change, and it immediately brings up feelings of stress.
We like to get comfortable in our routines. Yes, we stretch, we grow, but at a pace that feels, well, convenient because we’re in control. Thriving when we’re out of control is a much tougher prospect; it takes us out of our sweet spot on our way to discover what we hope will be a new cozy place.
The bottom line to successful change, whether personal or organizational, is it requires change management. Winging it will take you somewhere, all change does, but it may not be where you want, or intend, to go.
Out of undergrad, I was hired as a change management consultant and never looked back. Since then, I’ve not only focused on organizational change but began to research and understand what creates change for each one of us as an individual.
Poor reception for some early change management programs I supported taught me that change management is not the same as project management. Early on, most of my change management experience was related to IT change. Successfully cutover from one system to the new system and boom – change management. Um, no.Unfortunately, that thinking glossed over the magic that would make the change stick and avoid pissing of critical employees along the way. Project management is about process and at its heart, change management is about people.
20 Change Management Lessons from Working Over 20 years in Change
1. Organizational change management has three key aspects: Sponsorship (who is sponsoring the change? Make sure they are active, visible supporters.), Training (what do I need to know/do differently after the change), Communications (2-way during, before and after the change). You need to consider all of these pieces in a successful change program.
2. Identify a sponsor who has influence. If the sponsor does not have the necessary influence both up and down the chain, but instead is given the responsibility without authority, the change program is doomed from the start.
3. Conference calls can and should be a part of the communication strategy, but you need to go to where the people are too. The impact of looking eye to eye is hard to replace with a conference call. Besides, what do you do on a conference call? Check your phone, email, Candy Crush? Yeah. Most other people on the call are doing that too. Get out from behind your desk already.
4. A feedback box in the break room only works if you respond to people’s concerns. Addressing issues without telling people they’ve been addressed is not very useful.
5. Change management communication is more than just PR. It’s not a one-way deal. You need to create forums where you can listen to people’s concerns and respond. If you don’t have a firm answer, “I hear you” and “I’ll find out” or “I’ll figure it out and get back to you” works wonders.
6. You need to trust your employees. Give them opportunities to get together and talk about the changes even when you’re not in the room facilitating (i.e., controlling the situation). Make time to meet with them afterward and hear about their concerns, ideas and suggestions.
7. Don’t be afraid of implementing recommendations that come from the team to support the change. If your change management efforts consist of a bunch of senior leaders who lock themselves in a room for endless meetings and to solve every problem… it’s time for a change.
8. When your change requires the team to learn new skills, give them multiple ways to acquire the skills. A mix of job aids that can be posted in their workspace, live training events, webinars and online training are likely necessary. Change and learning are not one size fit all.
9. Remove other options. I know that this sounds harsh but if you’re asking people to change the way they live and work, but they can still do the same thing they’ve always done, and it works, do you think they’ll change? No, me neither. This applies to both organizational and personal change.
10. Be a stickler for the process. You may feel like a jerk, but new procedures, systems, processes, ways of working take time to be adopted. Training is not a magic switch; it’s only a single component of the overall change management solution.
Alternative Beta Strategies: Alpha/Beta Separation Comes to Hedge Funds
Written by: Yazann Romahi, Chief Investment Officer of Quantitative Beta Strategies, J.P. Morgan Asset Management
A quiet revolution is taking place in the alternatives world. The idea of alpha/beta separation has finally made its way from traditional to alternative investing. This development brings with it a more transparent, liquid and cost-effective approach to accessing the “alternative beta” component of hedge fund return and a new means for benchmarking hedge fund managers.
The good news for investors is that the separation of hedge fund return into its components—rules-based alternative beta and active manager alpha—has the potential to shift investing as we know it. These advancements could democratize hedge funds and, at long last, make what are essentially hedge fund strategies available to all investors—even those who aren’t willing to hand over the hefty fees often associated with hedge fund investing.
A benchmark for alternatives
With respect to traditional equity investing, we have long accepted the idea that there is a market return, or beta—but this hasn’t always been the case. Investors used to assume that to make money in the stock markets, one needed to buy the right stocks and avoid the wrong ones. The idea of a market return independent of skilled stock selection seemed ridiculous to most market participants. Yet today, we would never invest in an active manager’s strategy without benchmarking it against its respective beta.
Interestingly, hedge fund managers have been held to a different standard. Investors have been much more willing to accept the notion that hedge fund strategy returns are pure alpha, and that their investment returns are based entirely on the skill of the fund manager. That notion explains why investors have been willing to accept a “two and twenty” fee structure just to access what has been perceived as one of the most sophisticated and powerful investment vehicles available.
In thinking about the concept of beta, consider its precise definition—the return achievable by taking on a systematic exposure to an economically compensated risk. In traditional long only equity investing, the traditional market beta has been further refined as a number of other risks have been identified that are commonly referred to as “strategic beta.” These include factors such as value, momentum, quality and size. But no one ever said that these risk factors must be long-only.
Over the past decade, as more hedge fund data became available, academics began to disaggregate hedge fund return into two components: compensation for a systematic exposure to a long/short type of risk (alternative beta), and an unexplained “manager alpha.” What they found is that a significant portion of hedge fund return can be attributed to alternative beta. That fact has turned the tables on how we look at hedge fund return. With the introduction of the alternative beta concept, hedge fund managers will have to state their results, not just in terms of total return, but also as excess return over an alternative beta benchmark.
Merger arbitrage—an alternative beta example
The merger arbitrage hedge fund style can be used to illustrate the alternative beta concept. In the case of merger arbitrage, the beta strategy would be the systematic process of going long every target company, while shorting its acquirer. There is an inherent return to this strategy because the target stock price typically does not immediately rise to the offer price upon the deal’s announcement. This creates an opportunity to purchase the stock at a discount prior to the deal’s completion. The premium that remains is compensation to the investor for bearing the risk that the deal may fail.
Active merger arbitrage managers can add value by choosing to invest in some deals while avoiding others. Therefore, their benchmark should be the “enter every deal” strategy, not cash. In fact, the beta strategy explains the majority of the return to the average merger arbitrage hedge fund. And it doesn’t stop there. Other hedge fund styles that can be explained using alternative beta include equity long/short, global macro, and event driven. Note that the beta strategy invests in the same securities, using the same long/short techniques as the hedge fund strategy. The difference is that the beta strategy is a rules-based version that can become the benchmark for the hedge fund strategy. After all, if a hedge fund strategy cannot beat its respective rules-based benchmark (net of fees), an investor may be wiser to stick to the beta strategy.
Implications for investors
What does all this mean for the end investor? Hedge funds have traditionally been the domain of sophisticated investors willing to pay high fees and sacrifice liquidity. Alpha/beta separation in the hedge fund world means that investors can finally choose whether to buy the active version of the hedge fund strategy or opt for the passive (beta) version. Hedge fund strategies can be effective portfolio diversifiers. Now, through alternative beta, virtually all investors can access what are essentially hedge fund strategies in a low cost, liquid, and fully transparent form. For investors who haven’t had prior access to hedge funds, this could be welcome news. Not only can investors look at an active hedge fund manager’s strategy and determine how it has done compared to the systematic beta equivalent, they can also invest in ETFs that encapsulate these systematic strategies.
When looking at one’s traditional balanced portfolio today, there are plenty of questions around whether the fixed income portion will achieve the same level of diversification it has provided in the past. After all, with yields still low, there is little income return. Additionally, the capital gains that came from interest rate declines are likely to reverse. With fixed income unlikely to adequately fulfill its traditional role in portfolios, there is a need to find an alternative source of diversification. This is where alternative strategies may help. For investors seeking to access diversifying strategies in liquid and low-cost vehicles, alternative beta strategies in ETF form are one option.
Looking for an alternative to enhance diversification in your portfolio?
For investors looking to further diversify their overall portfolio, JPMorgan Diversified Alternatives ETF (JPHF) seeks to increase diversification and reduce overall portfolio volatility through direct, diversified exposure to hedge fund strategies using a bottom-up, rules-based approach.
Learn more about JPHF and J.P. Morgan’s suite of ETFs here.
Call 1-844-4JPM-ETF or visit www.jpmorganetfs.com to obtain a prospectus. Carefully consider the investment objectives and risks as well as charges and expenses of the ETF before investing. The summary and full prospectuses contain this and other information about the ETF. Read them carefully before investing.
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