Case Study Details
Case Study Details
Since its inception in 1998, Cromwell Property Group has grown to become one of Australia's largest real estate investment trusts (REITs), weathering the global financial crisis - and its significant impact on mortgage and real estate values - far better than its peers. But, as it paused to take stock in mid-2013, the firm was concerned it might be losing its focus.
"When we launched as a startup, it was on the basis that we would look after other people's money, particularly people who wanted a retirement income and for whom security was very important," explained Paul Weightman, Cromwell's CEO since 2008. "We had a very tangible and visible link to these investors. Then we grew so fast and in so many directions that we were afraid this link had weakened."
The concern emanated in part from the attention the firm was receiving from investment analysts and fund managers. "Everyone's an expert, and they soon start to tell you how to run your business, which is really a way of saying to run it like everyone else does," Weightman said. "We were headed in that direction when we decided to take a breath."
Eager to reexamine its value proposition and position the firm for its next stage of growth, Cromwell engaged Lapin International in September 2013. Cromwell chairman Geoff Levy had met David Lapin and read his book, Lead by Greatness. He passed the book to Weightman, and "we both were impressed by its messages," he said.
Just prior to the engagement, Weightman and other managing partners had decided on the next tier of the firm's various leadership groups. Their input would be essential to the firm's soon-to-launch strategic review process. Eighteen of the firm's employees were involved in the exercise.
The strategic review, assisted by Lapin International, "began with an interview process to discuss what we all thought were the great things about Cromwell, to draw out what was truly special about us," Weightman said. "The feedback was that we had a fantastic culture that we should not squander."
This culture rested on a commitment to do what was in the best interests of the firm's customers, its individual investors. These people were the primary beneficiaries of Cromwell's services, and the firm, with Lapin International's encouragement, personalized them as "John and Mavis."
"Everything we did was for the benefit of John and Mavis, whom we imagined were a married couple nearing retirement," said Weightman. "Our investment decisions, how we set up the business, and how we presented ourselves - all of it had to be for John and Mavis. Otherwise, we were not living up to our purpose."
As the review process gave birth to John and Mavis, the firm was in the thick of numerous decisions that required evaluation. These included potential transactions to meet analysts' and investment bankers' demands for further growth to improve earnings, and a complete refurbishment of its offices at its headquarters in Sydney. Cromwell went forward with the latter (even naming one of the new conference rooms John and Mavis, after a married couple that had invested with the firm at its beginning), but it passed on the former.
"We had an opportunity to buy another REIT that would have required us to go up the risk curve a bit," Weightman explained. "The investment banks kept saying to do it, because we'd get scale and eventually the share price would go up. But the immediate effect would have been a decline in our distributions."
In considering the acquisition, the firm thought of John and Mavis. "It would have meant a smaller check each quarter for them," said Weightman. "Sure, the share price might go up eventually, but how would they buy groceries in the time being?"
Thinking of John and Mavis also encouraged the firm to set up The Cromwell Foundation, a charitable organization, as well as determine the focus of its donations.
"We thought about the kinds of investments John and Mavis would make, and recalled that one of our investors in his fifties had contracted Parkinson's disease," Weightman said. "Another charity we invested in provides research money towards trigeminal neuralgia, a chronic pain condition that affects predominantly older people. Sufferers say the pain is so acute they consider suicide."
Once Cromwell formed the foundation, many of its investors donated funds to it themselves. The linkage the firm feared lost between the company and its customers remained intact.
Said Weightman, "It all comes back to doing what we can for John and Mavis." Meanwhile, despite declining to acquire the target REIT, Cromwell has continued to grow.