Brett Hickey founded Star Mountain Capital at the age of 32 with a very important goal in mind: build a business with an unbeatable culture. Create a place where he wanted to spend his time, alongside people he wanted to spend his time with. Almost 10 years later, Star Mountain has grown to manage ~$1.5B in assets, and employs more than 40 full-time people plus an additional 35 operating partners across 20 cities… all while never losing site of the importance of maintaining a great work culture.
In this episode of Axial’s virtual Q&A series, Axial CEO Peter Lehrman sits down with Brett to hear more about the strong emphasis that is put on Star Mountain’s culture, and furthermore, how the firm thinks about things like culture, trust, and accountability in its investment process.
Introduction – 00:00 – 2:50
The basis of culture in the workplace – 2:50
- Culture can mean almost anything to anyone; there are many “cultures”
- It is extremely important to understand and define your culture to get the right people at your company
- What was most important when starting Star Mountain was to create a culture that Brett wanted to be a part of himself
- There is positive stress where you’re driven and motivated, but there is also negative stress that is counterproductive and it’s not helpful for generating good investment returns, or people’s well being
- It all comes down to trust; you need to trust your partners to deal with investments, your relationships, etc.
Where does culture go awry? 6:40
- No one starts a company and says they want a culture of distrust, so on the surface it is something that everyone agrees with… so where do things so wrong?
- Star Mountain constantly places focus on its “North Star”; what is most aligned with your North Star? This needs to be looked at both for big decisions and little decisions
- A lot of firms miss on a very simple thing: creating an alignment of interest
- 100% of the Star Mountain team — everyone from the CEO to the office manager — is a shareholder in the business; this creates an alignment
- You should also be looking at what behaviors you motivate with economic incentives: Do you win together or do you win on an individual level?
- A team mindset when it comes to economics brings everyone together
- Having a team-based approach also creates an environment where everyone has to be driving high value
- That said, you need to understand that different skill sets are complimentary, so one person may drive value in one area, and someone else may drive it at another time or in another area
- It’s all about how you motivate people
Going beyond economic incentives – 12:05
- You need to look for opportunities to build trust with people
- At the investment committee level and the investment process level, you need to make sure that no one is going to jump down anyone’s throat; creating this “safe space” is a way to foster an environment where people feel comfortable expressing thoughts, concerns, and questions
- You need to build frameworks within your different processes; maybe start out with a brainstorm where people can contribute ideas without immediate feedback, and then after you’ve exhausted the brainstorm, you can evaluate which of the ideas make the most sense, and then you can create an execution plan and execute on it
- Loud voices in the room often dominate, and you have to make sure these voices are toned down so that everyone feels comfortable contributing to the discussion
- Advice from Tony James from Blackstone: “Create an environment of robust debate”
- Another part of building trust is making sure that people understand that challenges are an essential part of building a business, and because things will always be imperfect, that means mistakes will be made
- You will be able to build trust by addressing mistakes in a productive manner: why did this happen, how can it be avoided in the future, what processes can change
- It is all about course correcting in a positive way; you need your people to feel like it’s okay to fail and that they won’t be chastised for it
- Other ways to build trust…
- Creating a safe stable business makes people feel safe in their career (this is why transparency and communication are really important)
- If you want people to take what they do seriously, they need to understand how it fits into the broader picture
- Nothing is a silver bullet on its own; what is important is taking a culture-first mentality to everything you do
- Sometimes it’s most important to look at the long-term versus short-term value: you could have an amazing producer who is bringing a lot of immediate value, but if they have a bad attitude and end up being a cancer within the business, they can cause more trouble/loss long-term
Accountability & finding the right fit – 24:25
- There are always going to be moments in time when people falter; no one has the perfect attitude all the time; how do you hold someone accountable for their off-moments without breaking the trust?
- Setting expectations from the beginning is extremely important
- You need to look for people who understand the reality that no one is perfect and you need constantly be looking to improve
- Sometimes it’s just not the right fit; you may have people who self-select out because they don’t feel the role is a fit, and otherwise, you should be helping people realize what is the right fit
- Once you build a really solid foundation of good, smart, successful talent, continuing to hire that way can then become a self-fulfilling prophecy
- When you invest in the top of the hiring funnel — it may take a lot of time and money initially — you’re actually saving time and money later on when because you’ll be less likely to need “adjustments”
Considerations in the investment process – 36:00
- Star Mountain has turned down businesses that they thought had a great business model and great financials, but they did not feel good about the culture and the way the company was run
- There’s a higher volatility in businesses when you have a management team that struggles with things like transparency and managing challenges, even if the rest of the business seems very solid
Assessing culture in the diligence process – 40:15
- Look at things like transparency, communication, organized processes and procedures, risk management
- Making the the entire organization understands the way things are laid out is extremely important
- How are people being treated?
- Is economic interest aligned across the entire organization?
- Speak with some of the more junior people; if you build some personal rapport with people who are a bit lower on the totem pole, you’re able to gauge how they feel about whatever is going on
- (In a pre-COVID world) Star Mountain would host a lot of events across the country; this would help them to get to know people outside of the workplace and it really helps to get people to open up a bit more
- Building empathy is the underlying key here; you’ll get more out of people if you’re easy to talk to and relatable
Mentorship & personal development – 44:05
- Focusing on positive stress can be a good way to always push yourself: challenging yourself, executing things with vigor
- YPO has a motto: lifelong learning
- Remaining involved in the academic community; there is always more to learn and you’re going to improve yourself by listening to other people
- Figuring out the right questions to ask is hugely important
- When building a network of people, you can bucket different people out into concentric circles, and then when you need help on a specific area, you can look to those concentric circles and hopefully you’ll have two or three in each
- Building a network is not necessarily organic or easy — you need to lean in
- If you spend time on things like charitable organizations, academic organizations, etc. you’ll come across many people (that you then need to build trust with)
- If you make it a point to add value to every situation and listen and learn from everyone around you, you’re setting yourself up for success
- Surround yourself with smart people
- Spend time helping other people and they’ll be more likely to want to help you
- When you do get time with people, you should be mindful and respectful about the use of that time
- Investing in yourself is a smart investment