eriences from generating ideas

April 15, 2019

By Giorgio Vellani

The financial fund business often generates idea listening to their lead users. Lead users are professional investors that understand the need of diversifying the risks hence the expected return. The higher the expected return, the higher the risk. Financial institutions usually diversify their products (i.e. funds) according to risk (and as a consequence the expected return). Due to the complexity of the products the hybrid process is the way that the product is generated. Different teams are involved in each part of the development (financial/risk/legal/compliance/operations/product development etc.), every team has a dedicated person that focuses on the product but still has her/his entire team to use as a sound board to detect the upsides as well as the downsides. The dedicated person then joins the team composed from other departments to canalize the information. Usually a person within product development is the one that leads, makes sure that the product goes through the legally required committees and finalizes the process. Depending on the complexity of the product, the process could be up to three years.

When it comes to work motivation, while the hygiene factors described by Herzberg’s (1966) are often met in the financial sector the motivator factors are not as well met. Pay, security, and general working conditions are generally very good in financial industries. When it comes to responsible work and autonomy in doing the work there is such a restraint from the legislator as well as the reluctant risk attitude within financial organizations that those elements are seldom met, therefore the satisfaction arising from the accomplishment of difficult tasks is not even accomplished.

Employees in a financial institution seek intrinsic as well extrinsic motivation in developing ideas that they have extrapolated from a costumers need or that has been suggested by a customer. The intrinsic is reworded by having the idea translated into a fund (a product). The process from the idea creation stage to the delivery stage is a long, structured and legally regulated process especially in the evaluation stage. Often does not result in the creation of a product (majority of ideas are not translated into products). Being able to go through such a process gives an intrinsic reword. Groups and committees are required by law to evaluate the idea from a business, risk and possible financial perspective. The composition of the group is heterogeneous: representative from legal, compliance, risk, finance and business development are present.

The extrinsic reword is given by the economic performance of the product that is translated into a financial reword to the fund creator/manager. Often the fund manager of the best performing fund is internally reworded which creates another element of extrinsic reword.