Ariel Investments Case Study Part 2: Headcount strategy

Mellody Hobson

Lesson time 07:44 min

Mellody breaks down the tough decisions that she made around Ariel’s head count strategy. She will share how she handled internal and external communications around this issue, and what she did to keep morale and confidence up during this challenging time.

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Topics include: A Difficult Decision • Internal Communication • External Communication


[MUSIC PLAYING] - Okay, now that you've had a chance to think through what you would do, I'm going to tell you what actually unfolded. [MUSIC PLAYING] These moments of truth in business are never fun. So I took the path of accepting that I needed to make hard choices. And ultimately, that meant, for us, layoffs, which in the history of the firm we had never, ever done. And it was a rare phenomenon, in general, for investment firms like us. We thought that it was smart to assume that things could continue to be bad. And we also thought that we didn't want to be in a situation where we did rounds of layoffs, that it was better to be one and done. So decided we would cut 20% of the staff, but we were very, very deliberate. And we were very clear about we were not going to cut any of the research team. We wanted to make sure clients understood that we were keeping that intact because that was the future of the firm. Those are the people making the decisions, driving the decisions that leads to the performance outcomes that we get. We also said nothing related to compliance. We wanted to make sure that they were aware that we were going to keep running the business extremely well, and they were going to not have to worry about something going wrong from a compliance standpoint because we were too thin. So then we looked at all of the other areas of the firm where we thought we have nice-to-haves versus needs-to-have. We love these people. We love the contribution that they make. But in this environment, there's no real reason to have them. For example, we had a person who was in charge of sponsorships and promotions and advertising. Well, when your assets fall the way ours did, you weren't going to be doing a lot of that. We did it as well with support staff where we thought that we had the luxury of having more people than we needed at times. And then we looked at some junior professionals and professionals. At the end of the day, we also said we had to look at the overall compensation of senior people, and bonuses came down a lot. Now that's the thing about our business. A big part of compensation is tied to bonus. So all of the bonuses came down. And the bonuses for John and my bonus, specifically ours came down a lot more than everyone else's. And it was the right thing to do. [MUSIC PLAYING] The communications issue of a layoff is extremely important. This was one where I said, I have no experience at this. I have to be the person who helped drive the outcome, along with our HR team, et cetera, but I said, I need help. So once again, I phoned some friends that would help me think through what the best way was to go. And again, there was just really tremendous advice. George Roche at T. Rowe Price-- I'll never forget this-- he said, I can tell your voice sounds very serious. And so he pulled over wherever he was. And I said, this is what I'm looking at. Tell me how you would think about ...

About the Instructor

Mellody Hobson knows how to make tough calls in trying times. As one of the most influential leaders in business today, she’s led companies through junctions of financial crisis, acquisitions, and restructuring. Become a more dynamic, confident business leader by diving into real-life case studies from Mellody’s career. Get an inside understanding of the pivotal decisions she’s made from the top, and build a strategic decision-making framework for your next step as a business leader.

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Mellody Hobson

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