By Alton Cogert
After winning the British Open at the young age of 25, by leading the field of the best golfers in the world from start to finish, Rory McIlroy was asked how he did it.
As Rory put it, focusing on the process, “takes the result out of it…If you do that to the best of your ability, the result takes care of itself.”
And that applies to investing as well.
We’ve discussed this in previous blogs, but a good process that produces a poor result is bad luck (Rory will not win or even be on the ‘first page’ of the leaderboard in every tournament he enters.). Meanwhile, a good result from a bad process is mostly due to good luck.
In other words, and this is difficult for many of us to truly internalize: Process is more important than results.
So, when your investment manager speaks of outperforming the benchmark, it should carry less weight in your thinking than how the manager achieved that result.
What is the manager’s investment process? Has it changed lately? How does the manager make investment decisions? Who is involved and why? How does the manager’s investment process apply to your company’s portfolio and its related goals and objectives?
On a broader scale, the questions are even more difficult.
What is your company’s overall investment process? How do you accomplish the various steps within what we call the Investment Process Value Chain, also previously discussed in blogs and in my book? How often do you review that process for its internal strengths and weaknesses, as well as any external opportunities and threats?
Now, it is easy to finish reading this blog entry and say, “Good ideas. I will get to that in the future.” But, it is undoubtedly more difficult to set aside time to work on the investment process, in all its complexity and depth.
So, perhaps it is time to pick a “spot” for reviewing the process and then stay focused on it. This will take some hard work.
But, something tells me Rory McIlroy didn’t win the Open by shying away from working on this process, and neither should we.