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bring more and different knowledge and perspectives to the table, but move more slowly
through the creative process (and time is usually of the essence). (Also, larger teams need
heavier methodologies.) Firms may also consider using a subgroup of a few people as a
design team, which reports periodically to the larger product team, as well as a software
development team. Such a structure enables the design team to move quickly, while still
benefiting from the peer review of the larger group.^15 Further, we of course recommend
that the team manager be someone with experience managing multimillion dollar projects.
In general, a group will be more critical of its collective work than an individual.^16
A good team leader cultivates such an environment, where team members interact often
and attend regular meetings. Good leaders use checklists to share ideas, to ask questions
systematically, and to reformulate problems. While team members are sure to disagree, in
resolving disagreements, they often do their best thinking. Nevertheless, in the end each
team member is accountable to the team for finishing tasks on time. If one fails, the team
as a whole fails.^17
Importantly, management must clarify and communicate up front who owns the
track record of the trading/investment system and how credit for performance will be
shared, keeping in mind that retail customers prefer investment products they associate
with a person instead of a firm. For retail funds, research shows that the financial media
are more likely to mention funds with named managers. Since most such mentions or
citations are positive, exposure leads to inflows. Despite this fact, firms today are less
likely to identify managers than they were a decade ago.^18 We know of funds where the
team members were not listed as managers. Rather, the named manager is a partner in the
firm. This ensures that the ratings firms recognize a consistent manager.
According to Massa et al ., in fact, the share of funds managed not by named manag-
ers but by unnamed teams has increased by a factor of 3–4. Nevertheless, naming manag-
ers yields a significant marketing benefit and evidence also exists that naming a manager
may create stronger incentives for the manager to perform well. Also found is underper-
formance by multimanager funds, though this is due entirely to underperformance by
funds managed by anonymous teams; funds managed by multiple named managers per-
form as well as funds managed by named individuals.^18
The research suggests that a manager (or managers) tolerates less return diversion
when his (or their) name is publicly associated with the fund. Unnamed managers, it
could be argued, have a higher tolerance for what we call nonconformance. Publicly giv-
ing managers or product teams credit for a fund ’ s track record can serve as a powerful
motivator. In the end, the decision to credit managers for fund performance generates a
strong incentive.^18 We believe that the named manager should not be the team leader.
Senior financial engineers and IT professionals should leave the trading/investment sys-
tem after implementation to work on starting new systems. Keeping them with the system
in an ongoing fashion will limit the long-term profitability of the firm. We recommend
the named manager be either a marketing person or a trader, that is, someone who stays
with the working system.
Womack et al. (1990) cite the strong association of a new product ’ s success
with the career and reputation of the development team leader as a main reason
Japanese new car development yielded better cars in less than half the develop-
ment time compared to the US.^19The need to share credit in the end has tradeoffs. According to Massa et al .:Mutual fund investors as a group are known to chase past performance. Therefore,
if investors associate a fund ’ s performance with its manager rather than its family,4.4. THE ROLE OF THE PRODUCT TEAM