Talent Development
Succession Planning, Chicago-Style
The University of Chicago knows a thing or two about developing investment talent.
Among its most notable alumni are 10 winners of the Nobel Prize in Economics, including Milton Friedman, Harry Markowitz, and Eugene Fama. Jon Corzine, former CEO of Goldman Sachs, studied at the university’s business school, as did AQR Co-Founder Cliff Asness, Morningstar Founder Joe Mansueto, and Oaktree Capital Co-Chairman Howard Marks. Renowned investors Michael Larson (Cascade Investments) and Eric Doppstadt (Ford Foundation) are also U. Chicago graduates.
It’s quite the legacy—and endowment CIO Mark Schmid is well aware of it. His investment committee is, unsurprisingly, full of U. Chicago alumni and investing talent.
“The bar was raised for me seven years ago when I moved over here,” he says. “The investment expectations are higher here.”
Fortunately for Schmid, the former CIO of pension funds at Chrysler and Boeing, he has a formidable track record of his own. Robert Manilla, a long-time colleague at Chrysler, is now CIO at the Kresge Foundation. Paul Cavazos worked with Schmid at both Chrysler and Boeing before taking charge of DTE Energy’s pension funds in 2007. He joined outsourced-CIO firm American Beacon Advisors earlier this year (as CIO, naturally).
Doug Brown—Schmid’s successor as Chrysler CIO—now runs Exelon’s pension and ranks 39th on this year’s Power 100 list. Bob Watson, another long-time Chrysler colleague of Schmid’s, took over the helm from Brown in 2009. Jay Laramie left Chrysler that same year after more than a decade on its investment team and is now responsible for PepsiCo’s pensions. Andrew Ward (#42) succeeded Schmid as CIO of Boeing.
The secret to encouraging talent within a corporate culture? For Schmid, the seeds were sown at the beginning of his career at KPMG as a certified public accountant.
“The training meant you worked with a lot of teams and were given supervisory experience pretty early,” he recalls. “I’ve always worked in a team environment in which if somebody is really good, they can become a supervisor, move on to manager, and hopefully someday partner. I embraced that philosophy no matter where I’ve worked.”
At Chrysler, which Schmid joined in 1986, there was a similar “rotational program,” meaning staff could move from one role to another “to enhance development,” he continues.
“I’ve always felt that was the best way to train people: Give them a new challenge, let them run it, don’t micromanage, and, when they succeed, give them something else to think about. Most people are pretty good in that environment. It’s not rocket science.”
Two years ago Schmid’s then-deputy at U. Chicago, Que Nguyen—a “superstar,” according to her former boss—left the endowment for a role at Willett Advisors, the firm responsible for managing the bulk of Michael Bloomberg’s fortune.
Planning for such an eventuality is a “high priority part of my job,” Schmid says. Rather than call in the recruiters and spend weeks trawling through résumés, Schmid promoted from within, appointing Prakhar Bansal—a member of the endowment team since 2003—as the new managing director of strategy.
“Part of the way this works is you have to have good succession planning. You have to have a backup, because good people leave,” the CIO explains.
It’s not just talented deputies Schmid is prepared to replace when the time comes. “Part of my job here is that the management doesn’t have to go outside when I move on,” he states. “I’ve already accomplished that. There are definitely people here who can do this job.”
As with his previous two CIO positions, he isn’t planning on giving recruiters much business. —Nick Reeve