Investing in Company Culture

Invest your money in mutual funds!  Good advice?  Well, that depends on many factors, but if funds are in your portfolio, the success of that investment will be determined by your ability to select the right fund…and with roughly 15,000 mutual funds and ETFs to choose from, heaven knows we don’t lack for options!

Let’s play a little mind game.  If tomorrow you were to gather up investment cash from your friends and family and become a mutual fund manager, how would you go about deciding where to invest those precious dollars?  Would you go with large company stocks?  Use specific financial metrics and rations to screen for potential buys?  Focus on smaller growth companies?  International investments?  How much in fixed equities?  Would you invest in a particular sector of the economy?  Energy?  Housing?  Medical or financial services?  The enormity of the options would make such decisions incredibly daunting.

Well, it is interesting to note how one fund has gone about deciding where to invest their assets.  They decided to not go down the path of trying to pick winners from a particular sector of the economy or based on complex, computer generated financial projections.  Instead, Jerome Dodson, President and Chairman of Parnassus Investments, started the Parnassus Endeavor Fund in 2005 with a much simpler decision making model.  Mr. Dodson decided to place his investment stake in companies that treated their employees exceptionally well.  Yep – just that simple.  His Workplace Fund invests at least 80 percent of the fund’s assets in companies he believes to provide unusually good workplaces for their employees.  His rationale reflects one of MindSet’s Conquering Thoughts®: An investment in the GROWTH and SUCCESS of employees – both personal and professional – will come back to the company FIVE-FOLDCompanies that support their employees when it is needed most find those same employees there for their company when things are the toughest.

How has this approach worked out?  Well the Endeavor Fund was up 26% over the last year and since it’s inception in 2005 the fund is up 13.01%, beating the S&P 500 by more than 4%. With this success, the fund places in the top 1% of funds in it’s category over a trailing 3 and 5 year basis.

Although admittedly circumstantial, it is interesting to note the success of this fund to lend support to a key MindSet tenet, i.e., great company cultures do not come at the expense of a company’s bottom line.  Nope – here we get a rare chance to have our cake and eat it too.  MindSet fact: A healthy company culture reduces turnover, litigation, and expenses; a dazzling company culture increases loyalty, creativity, and revenue.

Why the heck do so few leaders get what Mr. Dodson figured out?  I have my thoughts and welcome yours – but I will save mine for another posting!