How we discovered one of the key reasons we hadn’t been delivering strong results until 2008

Author: Chris Freund, Founding Partner, Mekong Capital

July 26, 2018

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It was late 2008, and Mekong Capital’s transformation journey had been underway for around one year. We had made good progress in terms of our team attempting to organize around integrity, direct communication, and choosing to look at situations from being responsible rather than being victims of external circumstances. However, our performance still hadn’t yet improved in terms of post-investment value creation.

Our investment team was always very busy meeting with companies, but we just couldn’t see much impact, other than helping the companies recruit managers, which we had already been doing successfully by 2008.

I was feeling frustrated that all of our effort to transform our culture still wasn’t having much impact on the performance of investee companies. I didn’t understand why many of our team members weren’t applying what they were getting in the coaching sessions into new actions and better results at the investee companies. I would think what’s missing here? Why aren’t we having more impact at the investee companies?

We had already invested a lot of time and money in our transformation process, and I was starting to get some pressure from our shareholders about why we are doing this if its not having a big impact. We would need to show some improvement in performance in order to keep justifying this big investment we were making in our transformation.

One day during a company-wide coaching session, the session leader, Jerome Downes, started to ask specific participants in front of everyone else in the room what results they are accountable to deliver. To my surprise, no one knew. Some investment team members said what work they did, like “write investment memos” or “monitor investee companies” but made no reference to any results or outcome for which they were ultimately accountable. One person had no idea at all and just froze when asked what results he was accountable for. It was a very awkward silence that went on for a few minutes, and the impact was like a heavy weight had dropped in the room.

This was shocking to me, but the missing link had suddenly become obvious. Our team was working hard but it was mostly time wasted as it wasn’t organized around clear outcomes that would have an impact on the performance of our investments. I had always just assumed our team members were clear about what results we needed to deliver, but I realized on that day my assumptions were based on wishful thinking.

Of course this wasn’t their fault, but rather I hadn’t been providing the leadership to ensure each of our team members was clear about what results they were accountable to deliver.

So over the next few months we underwent a process to keep asking the team members what results they are accountable to deliver, and they struggled through it. It wasn’t immediately obvious to everyone and often the answers went through many iterations. For example, for Deal Leaders it went from something like “working on investment memos and being the main point-of-contact with investee companies” to “making and selling investments and monitoring their performance” to “adding value as an investor” to “ensuring companies achieve their annual targets” and ultimately to “ensuring our investee companies achieve their 5-year vision, and always in a way that we achieve a 5x return by the time we exit”.

Meanwhile, as the focus shifted from doing work to delivering results, some people didn’t want to be accountable for results especially given that until now working hard was always good enough. I had tolerated poor performance, always accepting people’s explanations that the poor performance was due to external circumstances and would probably be better next year. Those people left the company. But other people were energized about the idea of being accountable for clear results and these people became the core of our investment team.

After that, we ensured that the focus on results cascaded down from the big picture into everyday deliverables. Instead of joining meetings to “review”, “get an update”, “work on” something or “meet” someone, each meeting occasion would have a clear deliverable, which was well aligned with long term goals. If it wasn’t clear what the deliverable was, the meeting probably wasn’t necessary. This discipline forced us to keep re-thinking What results most matter here?

This breakthrough was so critical that we established one of our original five core values as “Results”. This is important because making the mental effort to get really clear about what results we aim to deliver and then organizing around those results has contributed to a massive breakthrough in the performance of our investee companies from 2009 onwards.

Imagine what’s possible when companies master the art of organizing around the results that really matter, and keep shifting the allocation of their resources towards delivering those results.