Tom Hughes has one of the biggest jobs in money management: integrating Scudder Investments into Deutsche Asset Management. Mr. Hughes is a builder by training, which may explain his collaborative approach to integrating Scudder. He trained as a naval architect and marine engineer, and became a Merchant Marine. After marrying, Mr. Hughes needed a shore-side job. He met a bond trader at a marina. Intrigued by the man's passion for his job, Mr. Hughes researched Wall Street firms and landed at Merrill Lynch & Co. in 1984, where he worked his way up from bond trader to, ultimately, managing director and head of Merrill's global securities financing group. In 2001, he was recruited to Deutsche by a former Merrill colleague, Mike Philipp. Mr. Hughes recently assumed Mr. Philipp's job as Deutsche Asset's chief executive officer. In an interview with reporter Christine Williamson, Mr. Hughes discussed the challenges of piloting Deutsche Asset through the next crucial years.
Q How is employee morale, since integration means change and job losses?
A Everyone wants to be part of something great and that organization (Scudder) is no different. And for a long time, I think, they felt that they were for sale. Having that over with and being able to move on and have it be an institutional money management organization that is truly committed to the asset management business made them feel that much better. I feel that people are pretty positive. It's been a lot of work.
For the people who know they are going to be part of the new organization, I think they couldn't be more excited. No. 1, they are part of an organization where asset management is a core activity. They also feel that the place has an ambition to be at the top of the chart in this business. And we are also a performance-oriented organization and I think the very best people are excited about that. The people who are not going to be part of the company, well, how are they going to feel? That's just human nature.
Q Did you involve a broad swath of employees in planning the integration?
A Yes. We took a very broad and deep approach of listening to what people had to say, what the new organization should be like. The basic theme was to create something that was transformational in nature. We were very fortunate that, although it didn't feel like it at the time, we had a heads of agreement (giving each side time to evaluate the other, before signing a definitive merger agreement) when we did this, vs. a definitive agreement when we announced (the deal with Zurich).
In a definitive agreement, what happens is that there are 10 people on this side of the Chinese Wall and there are 10 people on that side of the Chinese Wall. And then they get together. They don't know each other very well, and based upon very limited information, you make a whole lot of very important decisions.
In this case, because of the many rumors about the deal, we announced the deal on heads of agreement and we had 65 to 70 days to get to know each other before it became definitive.
Q What about the high number of terminations by Scudder institutional clients?
A I think that's typical. It (an acquisition)tends to be a wake-up call to those (clients) who felt they were on the fence with the asset management company to act. Those who haven't acted are giving us the benefit of the doubt, we hope. I would say that of the clients I've met, the mood is neutral-positive to very positive.
We think we get good marks from clients for being decisive and acting quickly. We get good marks from employees, those who are part of the new company, that we acted decisively and quickly. And enthusiastically. That counts because people see that we are enthusiastic about what we do and that we want to create something really good for our customers, employees and shareholders. Those are the three constituencies that have to be satisfied in a balanced way over a long period oftime to be successful.
Q How do you manage your days?
A Surround yourself with the best people you can find. Quickly! My typical day is that I get in between 5: 30 and 6: 00 in the morning. I call Europe, get quiet time, organize my day, answer e-mails. My day comprises talking to people. Like Dean (Barr, chief investment officer). I talk to Dean every day. I talk to European people every day. I talk to Bill Shiebler (in the newly created role of CEO of Deutsche Americas) every day. I talk to AsiaPac at the end of the day.
Typical days are filled with integration issues at this point. It's the nature of the times. I try to balance it all between integration issues, normal course of business and getting to know various groups in the organization better. I leave between 6: 30 and 7: 00 p.m.
Q How well do you know the portfolio management staff?
A I know a fair number of them. I need to get to know more, particularly since we're merging with another asset management company.
Today, I had lunch with 10 portfolio managers. I have working lunches with groups of people all the time. When I go to London or Frankfurt, every time I go there, I have lunch or dinner with a group of people. That's the way I get around and that's when they have an opportunity to tell me what they think is going on. I have lunch with everybody, all levels. Nobody is safe. I try to see everybody.
I try to maintain communication with people in the organization face-to-face as well as over the phone. So I'm able to contact people within the organization to get information, to find out what they think is going on and how they feel about things. That has been incredibly helpful. Trying to have a collegial approach, rather than "Gee, I'm afraid to see that guy." I want to be approachable so people feel they can tell me what is really going on, rather than what they think I want to hear.
Q Is there any investment capability that you still need to add?
A Large-cap growth is an area in which we are a little deficient....There are any number of different ways to do that (beef up large-cap growth). We haven't come to a decision yet. It's something we have to do. It's an important product line for our clients.
