In a new MasterClass, the Ariel Investments co-CEO discusses her strategies for navigating difficult situations.
Mellody Hobson has plenty of material to draw from for her first MasterClass: The course, available starting today, offers a deep dive into strategic decision-making inspired by Hobson’s experiences with some of the most renowned businesses in the country.
In the early ’90s, when Hobson was about to graduate from Princeton, she approached John Rogers, founder of the Chicago-based asset management firm Ariel Investments, for a summer internship — and she’s been at the firm ever since. Hobson became president at age 31, piloted the firm through the 2008 financial crisis, and, in 2019, became co-CEO alongside Rogers. Today, Ariel Investments manages about $17.1 billion in assets.
Hobson holds board seats at JPMorgan Chase and Starbucks and was previously the chair of the board for the animation studio DreamWorks. In 2016, DreamWorks’ business was under strain from the rise of streaming, and Hobson helped steer the studio through its acquisition by Comcast. “You can’t have magical thinking in difficult periods,” she says in the MasterClass. “You have to be extremely level-headed and extremely pragmatic.”
Hobson uses her experiences leading businesses through challenging periods as case studies for her MasterClass. Two of her strategies for communicating during difficult times stand out.
Make Your Plans Public
When the financial crisis hit in 2008, many companies in Ariel’s portfolio saw heavy losses, and clients pulled out. “During the worst of it, we got fired every single day,” Hobson says. “I would almost feel like I was putting on armor in the morning to go to work.”
According to Hobson, the first steps to dealing with any difficult situation are to understand the problem and to come up with a plan to address it. But, after that, you have to communicate what you are going to do to people both inside and outside of your company.
Internally, she says, your employees “need to have a very clear understanding … of what the action plan is and understand their roles in that plan.” You may need to speak to customers or clients, as well. “The more realistic you are, the more confidence you will actually instill in those with whom you’re trying to communicate.”
Ariel decided to lay off 20 percent of its staff — the firm’s first layoffs ever — to manage costs, but did not make any cuts to the research team. It communicated the reasoning behind that decision to its clients. “We wanted to be sure that our clients understood that we were keeping that [team] intact because that was the future of the firm,” Hobson says.
Even when you aren’t navigating a crisis, communication is key, Hobson says. If you’re working on a plan for a new campaign, product, or initiative, communicating what a successful implementation of that plan would look like can help you stay on track. Hobson describes a company she works with that writes a press release whenever they’re about to embark on a new plan, so that leaders can look back and measure success. “That’s a good way of keeping yourself honest,” she says.
Institutionalize Dissent
In 2008 and 2009, tensions were running high at Ariel. Communication was strained and, as Hobson puts it, “everyone got really touchy” whenever analysts questioned one another’s work in research meetings.
The firm needed a constructive way for employees to communicate with one another, even and especially when they disagreed with someone. To prevent people from feeling personally attacked, members of the research team were asked to take on the role of “devil’s advocate” for every stock someone was considering purchasing. “It helped for the analysts to know one of your colleagues is assigned to argue the other side,” says Hobson. “They’re not picking on you. They have to come in and create an argument to undermine your thesis.”
Once constructive dissent was framed as a part of each person’s job responsibilities, “it changed the whole dynamics of the meeting,” Hobson says. At Ariel, the practice continues to this day, and she credits it with helping the firm avoid groupthink and preventing employees from feeling defensive.
