Days later, Putnam CEO Lawrence Lasser was forced out and Charles "Ed" Haldeman, who was then leading the company’s investment division, was named the new chief executive.
Haldeman realized early on that the problems at Putnam were not confined to two or three people. "I recognized that it was a cultural problem," he says.
His first priority was to undo the hierarchical culture at Putnam, which Haldeman believed caused employees to focus on short-term gains rather than the needs of the client.
Within days of taking over, Haldeman drafted guiding principles for the company. The idea behind "One Putnam," which includes personal integrity, mutual respect and the highest professional standards, was to make everyone understand that they were all part of the same team, Haldeman says.
"We wanted to convey that no one area of the company is more important than another," he says. "That’s essential in order for the client to have the optimal experience."
Putnam reduced its staff by 11 percent, including 25 of the top 50 highest-paid executives, to create a flatter structure at the company.
To put teeth into "One Putnam," Haldeman eliminated the huge differentiation between how much senior management made and what everyone else got paid. Today, senior management is paid half what the senior management at Putnam was paid in 2000.
The company also changed how its portfolio managers are compensated. Previously, employees were not clear on how compensation was determined, but portfolio managers understood that getting their funds’ performance to the top percentage of their peer group was a goal. That vague incentive, however, could entice managers to make overly aggressive trades to get to that goal.
To address this, Haldeman implemented a new compensation program so that one-year fund performance accounts for 20 percent of a portfolio manager’s total compensation, while three- and five-year performance each account for 40 percent.
In line with creating a more collegial environment, Haldeman got rid of the executive dining room, putting in place an all-employee cafeteria, where he often eats. The company eliminated its formal dress code in favor of business casual.
Putnam’s turnaround has paid off. In 2006, 48 percent of the firm’s funds were in the top half of their peer group, compared with 40 percent in 2004, according to Lipper, a provider of mutual fund research. Twenty-one percent were in the bottom quarter of their peer group, compared with 25 percent in 2004.
In February, Marsh & McLennan announced it was selling Putnam to Great-West Lifeco, a financial services subsidiary of Canada-based Power Financial Corp., for $3.9 billion. Observers say the sale couldn’t have happened without Putnam’s about-face.
And in a nod to Haldeman’s efforts, Power Financial has asked him and his team to stay on board to manage the new company. For recognizing that culture, and not just compliance, is key to creating an ethical company, Putnam Investments wins the 2007 Optimas Award for Ethical Practice.
Headquartered in Boston, Putnam Investments is a subsidiary of Marsh & McLennan Cos. Founded by George Putnam in 1937 as the George Putnam Fund of Boston, the company today has 3,000 employees in Boston, London and Tokyo. Putnam posted revenue of $359 million last year.
Putnam Investments is a global money management firm that serves institutional and individual investors through financial advisors. With $187 billion in assets under management, Putnam manages mutual funds, institutional portfolios, 401(k)s, individual retirement accounts, variable annuities and alternative investments.
Workforce Management, March 26, 2007, p. 25 --Subscribe Now!