J. Christopher Donahue: Relationships in the Balance, Executive Strategies for Home & Office

We have a dog. I never really wanted to have a dog because I knew what would happen: it would just mean Ann would have to take care of the dog. But along the way, with all the kids and the pleading, finally in one weak moment, the Saint Louis Cardinals were in town in Pittsburgh. The kids were saying, 'Let's have it! We want a dog! We have a dog!' And I said, 'Okay, fine, we can have a dog.' Lots of cheering. Finally the oldest son says, 'Well, wait a second, when can we have a dog?' I said, 'Well, that's a very good question. We can have the dog as soon as I get back from St. Louis.' Lots of cheering. And my oldest daughter says, 'Well, wait a second, Dad, when are you going to St. Louis?' I said, 'Dory, I have no plans to go to St. Louis. As far as I'm concerned, I'm never going to Saint Louis.' Well, a couple of years later, because of business purposes, I had to go to the dreaded town of St. Louis. I have a younger brother, an utter deviant, and he knew about this so-called promise. He called the office and asked my secretary, 'Where's St. Louis?' I had told the family I went to Clayton, Missouri, it's roughly near the airport. Well, he spread the news among the kids, and when I got home, the computer paper was wrapped around the garage so that you could not enter it without bursting through, and on it was written in loving penmanship: 'Welcome home from Saint Louis, Dad. Bow wow wow.' That's why we have a dog. The message here is that if you want to keep your relationships, then you got to keep your deals. This was an example of it, obviously, but it's made a big impact on our family. And since we got a German Shepherd dog and have had it ever since, it's a big pact, a big impact on dogs as well.

Well, part of this relationship and part of the story I'd like to bring to you on behalf of Lumen Institute is how we have lived family, faith, and work inside our company and inside our family. And perhaps by focusing on a couple of elements here, we can tell the story and show you the beauty of the Lumen Institute plan. A little of the story of Federated Investors: it was founded 50 some years ago by three fellas that attended the same high school in Pittsburgh that I attended, and Dan Marino attended. This was what they did after they came out of high school and college: two of them were door-to-door mutual fund salesmen, and the third was a lawyer to keep those two out of trouble. One of our biggest accomplishments as a company is that we have dramatically improved the ratio of salesmen to lawyers in our company. We now have 170 salesmen and only six lawyers. But over time, this threesome began doing something at an alarming rate: having children. They had 27 children among them. They now have 135 subsidiary children. We also happen to have 135 investment companies, and now you see the connection between a $240 billion mutual fund company and family. In order to feed this growing brood, we had to keep on sponsoring more funds in order to make the whole machinery work. Need first, business second. And because of the importance of the sales element, my father always used to have this great expression: he would say, 'Remember, the stork does not bring the baby. There's someone else at work, and most of the time it says sales individual.' So yesterday we're part of the mutual fund industry; we're one of the top 10 companies. And if you look at Federated the way I like to look at it, it's much the reflection of the geography of Pittsburgh. One river you have to do the investment management, the other river the distribution. The banks of the river, though, tell another interesting story. One is the story of customer service and love. You've probably all heard the story about the couple, one of whom invested all of their proceeds in the go-go stocks back a few years ago and had to come home and explain to the spouse: 'Yes, I did invest. Yes, I've lost 95% of our retirement assets. Will you still love me?' The other spouse, a long pause, a stroke to the chin, and finally: 'Yes, I will always love you, but I will miss you.' The idea of customer service is to build enough love into the machinery that you can overcome the speed bumps that are inevitable in the marketplace. That's one bank of the river. The other bank is compliance, because today compliance is just a euphemism for trust. It's just the way the words have turned. So the business is bounded by love on one bank and trust on the other.

Now let's talk about some of the Lumen core values. You've got a little bit of a card in front of you, and I'm only going to pick the first two, and I'm going to talk about fairness and prudence under character building. And we're going to talk a little bit about our company and some of our experiences, and then we're going to take the same two themes and talk about them in a family setting as well. Fairness: our operative definition is right in front of you: it's giving people what their due is, and underlying it all is a key respect for the dignity of an individual. In a business context, this is what inspires you to get the right answer on what is fair. Let me give you some examples. The founding fathers' rule of thumb for their handbook was: we want everybody to enjoy coming to work. This intuitively respects your time, because I want everybody to enjoy the short time that we have here. It also means that if you don't enjoy coming to work, can we fix it? If we can't fix it, well then you move on, because that's what's required. So if nothing else, by the subtraction method, we got a lot of happy people working at Federated, and that's a good thing. But it's because it's not really permanent employment. Another aspect of 'enjoy coming to work' is to avoid what's affectionately known as seagull management. Seagull management is when the power monger flies in, flaps around, makes a lot of noise, dumps all over everybody, and then leaves. So you may know some seagull managers in your own experience, but this is something that you want to avoid. Another way we express it is we want everybody to be able to paint their own picture. And this reflects the intuitive creativity that's baked in every soul. But there's another compendium to that rule, and that is you have to stay on the canvas. And as the son of a West Pointer who attended West Point in the '40s, I can assure you that when you go off the canvas, there are consequences. Different strokes for different folks. If you have eight children as I do, I grew up in a family of 13 children, and the same strokes for everybody was never going to work. Yes, we have flexible time, and it's a little bit of the principle of subsidiarity where you allow the managers to do it, and we basically allow the managers at each level to determine whatever the hours are, and we've never had a problem. We have a dress code, always the subject of some tough discussions. But we think this is also directly related to the dignity of the individual, the dignity of the customer, and the degree of getting the work done. So we're periodically paraded for, 'When are we going to have dress-down day?' You know, well, we have dress-down day now, and it's Saturday.

There are issues that come up, and there are important issues that come up. We went through the troubles in the mutual fund industry on the frequent trading, etc., and they are reflective of some problems generally in society, which I'll get into. One of the problems that we had is we had portfolio managers that were doing things that were not deemed politically correct. They were not immoral, they were not wrong, they were not against any rule or regulation. They had been going on for a long time, and there was no deviant intent whatsoever. And so when we caught these people, we said, 'Well, you know, we don't want you to do that,' and that was that. We were excoriated in the press and by the regulators for not doing the stand-up thing to prove we get it, which is: when you catch anybody near any disturbance or trouble, you shoot them immediately for the greater good of the company. This to us violates two key principles. One is fairness: what was due? They weren't due to have their reputation slaughtered in the press. And what about justice? You have no right to slaughter an individual for the greater glory of the political correctness of the institution. Another example today: what happened to the Duke coach? In about five minutes he was gone. There was no time to find out or go through a process to find out what he was due. We're not even getting to the issue of whether he should have been about the formation of the fellas, an issue they don't even get to. But he was thrown overboard simply for the greater glory of the university. This is where we're looking for fundamental fairness. Another thing is, of course, goals, feedback, commenting, notice to people. And the reason for this is because it's basically fair. It's also a beautiful pattern; it's like spiritual direction: light, you talk, you get back feedback, notice, and all of the things work better. There are times when you make a mistake on this and don't get it right. I can remember one time my 10-year-old son had been kind of hard on him, and we sprung a dinner that he had to go to that he didn't really want to attend. Well, it was one of these restaurants in Pittsburgh, and all of a sudden he says, 'Yo, Dad' — beware when they say 'Yo, Dad' — 'May I be excused?' Be double worried when they say that. And he goes over, and there's a sign on the wall that says 'For restroom, use stairs.' And he stands there and starts fussing with his trousers in order to attract my attention. And this was his way of getting back at me for not having the balance of explaining what we were doing. Well, if you get the idea of this fairness concept, I think one of the results of it is you end up with peace of heart as an individual, and with a good strong culture as well.

Let's talk about prudence here. The definition on your little card: it's sound judgment in determining actions. There's a discernment quality to this. So we're big on education and training. We like to create professionals. And our definition of professional is that they have special knowledge, that they're committed to what they're doing because it is special, it isn't just only for themselves, and there is a transcendent quality to it. And so you try to train the professionals, and we found, as I am sure you have, that education is motivating as well. On charitable giving, we don't even have a written policy, but what we do is if some individual in the company has put their time, treasure, and talent into a deal and they're not killing babies, then we give them more money. We leverage off of what they do. We don't have to have a United Way staff, and it works out very well. We're also big on the pause button. The pause button in terms of making decisions. It's not an easy button like you see in the ads. It's one that allows for mature deliberation. So we have a big process for this. Or as the great Cardinal O'Connor used to say, when they bring him all these problems in New York, he would say, 'You know, I really don't have to swing at every pitch.' And you really don't have to swing at every pitch right now, at least most of the time. So the process is important, and this is important to us because it allows for the deliberation. One of the things I like to say about the process is that even if you sometimes get the wrong answer, the process counts. It reminds me of what Holmes said to his friend Watson one time: 'My good man, Mr. Watson, you have hit upon every single item and have gotten every single item wrong, but you have hit upon the process, and therein lies the solution.' One of the other things that's important is the communication loop, again respectful of the dignity of other individuals. So you've got to be on the communication. I don't know if perhaps you heard the news that Osama bin Laden up and died. Well, when he died, he got taken up into some seemed like a holding room, very nice, well-appointed room. It had doors on either side of it. And he was there waiting, and everything, and all of a sudden Thomas Jefferson comes in and walks up and slugs him right in the mouth. Well, Osama, he's kind of upset about this, and he wheels around, and all of a sudden George Washington comes in riding the front of that horse, pulls out his pistols and starts shooting him in the legs. Well, he's getting real upset. Before long, Robert E. Lee comes in wailing the sword and slicing him up. So Osama reaches in, he grabs his cell phone, and you can hear him yelling into the cell phone, and then coming back in pure English you can hear: 'No, Osama, we said 72 Virginians.' This is why the communication loop is somewhat important. Somewhat important. Because power, the power to do, doesn't necessarily mean the prudence to do. And there's a difference between your whim and your gut. The gut of a professional is worthwhile. The whim of just a passing notion is not. The result of prudence in the business, to me, is you get better quality decisions. That doesn't necessarily mean you're going to get them all right. But as the founding fathers used to say, you know, dying for the wrong reason is stupid. Dying for the right reason isn't so good, but dying for the wrong reason is really kind of dumb. For an individual with the prudence, you get peace of mind, peace of heart from the fairness, peace of mind from the prudence.

Well, we spend a lot of time in family. Let's talk about that a little bit. The name of this speech is 'Relationships in Balance.' I have the suspicion that the balance part is an illusion. A few weeks ago, the readings that we had had Isaiah getting his mouth washed out with charcoal. They had Paul talking about being born abnormally and committed to preaching. And they had Peter getting dragged away from his business. I don't think either of these three guys had balance in their life. They were unified in responding to their call, and they were in unity with Christ's message, but they were not in balance. For example, look at Jesus: He was the first M&A specialist. He did an unfriendly takeover of the Zebedee fish company. He just left the higher guns and all these things behind. And what did Peter try to do? His way of trying to deal with this is to have him fix up his mother-in-law, you know, she was sick. Well, I guess that worked out okay. But my message here is that I don't know that balance is the key so much as it is unity with what you've been called to do. Take time and eternity. Every father has to face the issue of time with the children and all of that. I was trained as a lawyer, so one time we're doing a really big deal, I mean a really big deal. It was during the spring time. We always used to play with the ball, and I'd come home with two big satchels. And my one daughter would say to me, 'Well, Dad, are we going to play Wiffle ball tonight?' 'Well, no, I got to do all this reading, you know, it's very important, big deal.' You know, next night, same drill. She asked me the same question: 'Well, Dad, are you gonna play Wiffle ball?' 'No, I got all this reading in here to do.' And she said, 'Well, why don't you have them just put you in a slower reading group?' And now you begin to understand how they think. And a kid, they only understand amount of time. They don't go for this quality jazz. But vacations are almost sacramental. In fact, vacations can become vocations. We scheduled a long trip one time, and we're taking the eight kids. And unlike a camp director, in fact, my true highest and best use is as a camp director. And so I'm in charge of the tickets, the planning, and all of this. And there's no way I mess up the tickets, but in fact they're messed up. We have all the family together except one ticket in the back, in the middle, in a center seat. So naturally my oldest son volunteers to go try that seat. And we go check on him; he seems fine, he's talking it up a storm. Two years later, we find out that he was talking to this fellow who, as they're landing, says to him, 'Jay, have you ever thought about being a priest?' He goes, 'No, no, no, that's ridiculous.' He says, 'Well, you've talked today, and I think you ought to think about it.' He said, 'How? Why would you say that?' He said, 'Well, I'm an Augustinian priest, and I do the vocation work at Villanova University, and you have a vocation a mile long.' This is how a vacation turns into a vocation. Well, eventually he gets hooked up with the Legionnaires. I'm not going to go through the whole story. But after trying out a retreat, he calls me on the phone from the retreat and says, 'Dad, I've decided to be a priest.' I said, 'Jay, that is the best thing I have ever heard. But as your father, I got to ask you a question: why are you doing this?' He said, 'Well, you've taught me all the issues, and I've debated them in high school and college, and now it's time to get on to the real issue of spirituality.' I go, 'Whoa.' I said, 'Jay, I got to tell you something on that one.' 'What's that, Dad?' I said, 'I've never had a thought like that in my life.' Without missing a beat, he says, 'Well, there's still time for you, Dad.' I said, 'Wait a second, you just fired me as spiritual director. I'm like the minor league manager, and you're going up.' He goes, 'Well, yes, Dad, I will always love you.' So you could feel the change over. He now had a program for me. Well, he was ordained over Christmas season in Rome last year. And one of the great things that he was able to do — I only gave you one story — is that my parents celebrated, in fact, their 60th wedding anniversary on December 26th, and he got to do the Mass. It was his third Mass. Now imagine the grandson renewing the vows: 'Do you, Jack, take you, Ridora?' And 'I do,' and then the ring and the whole ritual, and then finally a long pause after that little service. And he says — he always called my father 'Grandi' — 'Well, Grandi, you've done such a good job, why don't you go ahead and kiss the bride?' I'm telling you, there wasn't a dry eye in the place. It's all vacations becoming vocations.