The funds that have performed most effectively are those that have teams and individuals who can really play across perspectives and silos rather than coming in as representatives of a particular, individual perspective or silo.
Maximpact: Can you say more about how it works? Who is on the multilingual management dream team?
Jed Emerson: We speak of it as themes rather than directives in the report because in each case the constellation and makeup of the teams is different. Yet, at the end of the day, all of them reflect this multilingual orientation.
For example, you may have a fund with a leader who has more expertise on one side or the other but who has the ability to understand all the perspectives and the language of all the different silos he or she is drawing upon. The leadership team might be made up of individuals who are each fully multilingual, or be comprised of folks who come into the conversation with a deeper expertise in one or the other silos.
The important thing is that all team members have an understanding of the humility with which multilingual leadership comes forward. By that I mean an awareness of the fact that, though you may be really great in your area, you won’t be successful unless you’re able to take your expertise and marry it with that of the other experts in your team in an effective way. As individuals, it means seeing your own “blind spots” and working to establish a wider vision of where you yourself need to develop new skills and leadership language.
In the context of the funds we’re seeing, yes, there are individuals who are outstanding in terms of their work and expertise and skill set. But the success of the fund is a function of teamwork and integrated perspective and practice. It’s not the success of an individual, not the triumph of the charismatic leader. The charismatic leader may be able to hold the torch, but the light is shed by the team as a whole.
Maximpact: What are the core skills needed on a fund management team?
Jed Emerson: On the one hand, there are skills around being able to maintain financial discipline: analyzing deals, understanding the marketplace in which the deal will function, looking at various investors; perspectives on value creation in a possible deal. It’s having the skills needed in order to be a successful financial investor.
At the same time the management team needs to understand the impact context in which the investment will play out. For example, if your impact goal is job creation but you’re creating lousy jobs, then that’s not a successful strategy.
That financial discipline has to be complemented fully by an understanding of context and social opportunity. If you have both those things, you can then translate that social opportunity into financial metrics. In this way the impact investment process looks more like a DNA strand than a double bottom line. From this we derived the schematic for the Mission First and Last section of the report.
Maximpact: Does multilingual leadership reflect the multi-stakeholder nature of impact investing?
Jed Emerson: Definitely! It speaks to the idea that when you’re investing for impact there are multiple beneficiaries; as well as multiple actors contributing to value creation. You have various levels of financial return that come to shareholders and stakeholders alike. Those financial returns are in fact part and parcel of the generation of social and environmental impacts that grow out of being able to work on a sustainable financial basis. The multilingual team reflects that range of interests and outcomes.
Maximpact: Can graduate schools create the kind of multilingual leaders you’re talking about?
Jed Emerson: Not only can graduate schools create multilingual leaders, but they have to! I read a comment in a McKenzie report the other day that said business schools can no longer be teaching business as usual and the incoming classes are increasingly demanding schools give them the skills and tools needed to execute within this new context of impact generation.
20 years ago none of the graduate schools were doing anything like this. Then slowly things began to change. Harvard Business School started the ball rolling with its social enterprise initiative in the 90s. This was complemented by the work at Stanford Center for Social Innovation and Kellogg School of Management; I taught social entrepreneurship at Kellogg in 1999-2000.
We’ve seen this movement come forward over two decades; and now it’s been fully unleashed. I see the evidence everywhere. For example, I wasn’t able to attend the NetImpact conference this week but I was tracking the twitter feeds. Boy, could you feel the passion and enthusiasm coming through those posts and tweets! More than that, you could feel the sense of urgency and focused direction from the participants. To me, this is the driving force behind the need to train our future leaders in this multilingual way.
Maximpact: Are any grad schools doing it now?
Jed Emerson: A good example of a school taking up the challenge is the James Lee Sorenson Center for Impact Investing in Utah. Lewis Hower is their fund director. The interesting thing for me is that they’re using students to engage in the due diligence around impact investing opportunities.
When I first heard about this, honestly my reaction was, “Man, that’s got to be a recipe for disaster!” Because you’ve got these folks who are learning skills while they’re doing the analysis, so you might think maybe that analysis is going to have to be improved over time. Yet the work these students are doing with Center staff is evidently really strong. It’s very good analysis.
My other observation is that the students who are coming to learn at the Sorenson Center are not just business or economics students. They’re coming out of the humanities and much more traditional liberal arts backgrounds as well. Now, that is the future of impact leadership!
In my view, the Sorenson Center and others are creating an environment with the potential to produce the multilingual leaders of the future. No CEO can aspire to lead a global organization these days and not be aware of all the things beyond the balance sheet that will determine whether that organization is successful. As a matter of course, the leadership of these organizations will be looking to hire managers and team members who can come to the table ready to play on that basis. Business schools and graduate programs will have to provide their students with the education and the tools and the learning they need to be successful in this new market.
Maximpact: How can impact funds go about building these multilingual teams?
Jed Emerson: I work with a small set of family offices, one of which is currently recruiting folks to run a new impact fund. I wasn’t sure when we started recruiting what kind of candidates we would see. Truthfully, I expected a lot of candidates with very traditional private equity and venture capital backgrounds who had decided they were done making money and wanted to go “do good.” And I’m not such a big fan of the “do gooder” approach, so was kind of bracing myself;
But I was pleasantly surprised to see the number of folks that clearly fit our research team’s description of multilingual leaders. Yet the thing that really surprised and pleased me was the high caliber and solid quality of these individuals. The experience has validated my feeling we’re on the right track and the change is happening.
I’d like to point out that the Impact Investing 2.0 report doesn’t say, “This is what needs to happen”. It’s not prescriptive in that sense. What the report says is, “This is what is already happening in the most successful funds”. It describes what is currently the practice of the better organizations. As new fund mangers and new investors come up through these processes, I think we will begin to see the practices we identify in this report as the default operating process of the field. This will simply be the way we do business.
Maximpact: What happens to those poor charismatic leaders once the multilingual team takes over?
Jed Emerson: (Laughs) I think that the role of the charismatic leader will always be with us yet we’ll move beyond them being the focus. We need those individuals for movement building and for creating so many aspects of organizations. That said, you can’t build a successful organization on the back of an individual!
The most successful charismatic leaders will recognize this multilingual future. As opposed to the classic “founder-syndrome” individual who clutches on to power until the organization withers and dies, successful charismatic leaders will take on a new role helping position their teams for success.
The rise of multilingual leadership provides charismatic leaders with the option of an out, an opportunity to go back to developing new ideas, to be innovative, to be visionary; yet they will have to step aside. They’ll be able to pursue new avenues because they can be confident the teams they nurtured are shepherding their original vision; but taking it to new places and new levels of success.
I see “Leadership of the Whole” rather than leadership of individuals as the future of this sector. It’s a movement in many ways, but it’s also simply how you build effective sustainable organizations that are creating value over the long term; over multiple lifetimes and not individual careers. For me, this topic of leadership is really the crux of how we will all and each be successful over the long haul!
About Jed Emerson
Jed is widely recognized as an international thought leader on impact investing, performance metrics and sustainable finance. Originator of the term blended value, he has spent over two decades exploring how capital investment strategies may be executed to create multiple returns.
Jed has held appointments at Harvard, Stanford and Oxford business schools and has written extensively on impact investing, social return on investment, and related areas. He is co-author with Anthony Bugg-Levine of Impact Investing: Transforming How We Make Money While Making A Difference.
Jed is Chief Impact Strategist for ImpactAssets and chair of the ImpactAssets 50, a field-building strategy that promotes leading impact investing firms. He is a founding director of both Larkin Street Services and the Roberts Enterprise Development Fund (REDF), a founding board member of Pacific Community Ventures, and the first senior fellow at Generation Investment Management, among numerous other appointments.
Jed is currently a senior fellow with the Center for Social Investment (Heidelberg University) and senior advisor to The Sterling Group (Hong Kong).
You can follow Jed Emerson on Twitter via: @blendedvalue
[Image credit: Courtesy of Jed Emerson]