Tag Archives: Bill Gross

The $25 billion (probably) avoidable crisis

Like most crisis observers (pundits) I didn’t really think of the PIMCO problem as a crisis. I was a little more interested in its affect on my portfolio. But the financial services firm has seen an outflow of investor dollars of $25 billion since the crisis hit in September.

What would cause investors to pull $25 billion in invested funds? Would seem a cataclysmic event. Indeed, it was. PIMCO founder and investment manager Bill Gross left to join a competitive firm, Janus. Since then, the fund Gross is now managing jumped $66 million in September.

PIMCO is clearly fighting for its life with new announcements daily of major investors pulling out. This is a crisis.

The key questions are: what caused it and could it have been avoided. Knowing as I do that the way things look inside is always a lot different from outside, I should hesitate to jump in. But, I haven’t before.

The crisis was caused by Bill Gross leaving. It could have been avoided by:

1) keeping him from leaving

2) keeping him (or any other single individual) from building an individual brand and reputation separate from the organization brand and reputation

3) managing the departure better

After reading the Wall Street Journal report detailing his departure it is very clear that him leaving was no great surprise. He apparently isn’t the nicest man in the world, or his co-workers didn’t have the awe and respect for him that investors apparently do. So if things were going sour, how could it possibly be that he left with so little preparation and with such devastating results?

There are so many powerful lessons in this event that I’m sure there will be books coming out. As crisis pundits we tend to look at the cyber breaches, the active shooter incidents, even tornadoes and earthquakes to prepare for. In the world most of our clients live in, things like key people leaving are real world crises that cause worry and possibly devastating results. I know I am learning from this to include key departures on almost any list of risks to evaluate and prioritize. One of the greatest benefits of risk analysis and prioritization is to say: if this thing could kill us, what are we doing today to make sure it doesn’t happen. Good crisis preparation results in best crisis prevention.

So, have a look right now. Do you have superstars in your organization? The key question is–where do the essential relationships lie? For PIMCO, it was clear they were with Mr. Gross–and that meant the entire organization was very vulnerable. Steps can be taken right now to 1) make sure the superstars stay 2) spread the key relationships around other leaders 3) if a superstar is getting antsy, don’t wait until he/she jumps ship to try to rescue the relationships. Attack their antsyness, or prepare your customers right now for their potential departure.